ITEM 1.
FINANCIAL STATEMENTS
HENNESSY
CAPITAL INVESTMENT CORP. V
CONDENSED
BALANCE SHEETS
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash
|
|
$
|
1,366,000
|
|
|
$
|
72,000
|
|
Prepaid expenses
|
|
|
486,000
|
|
|
|
-
|
|
Deferred offering costs
|
|
|
-
|
|
|
|
179,000
|
|
Total current assets
|
|
|
1,852,000
|
|
|
|
251,000
|
|
Cash and investments held in trust account
|
|
|
345,028,000
|
|
|
|
-
|
|
Total assets
|
|
$
|
346,880,000
|
|
|
$
|
251,000
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
131,000
|
|
|
$
|
4,000
|
|
Accrued liabilities
|
|
|
5,846,000
|
|
|
|
75,000
|
|
Note payable to Sponsor
|
|
|
-
|
|
|
|
150,000
|
|
Deferred compensation
|
|
|
193,000
|
|
|
|
-
|
|
Accrued income and franchise taxes
|
|
|
100,000
|
|
|
|
-
|
|
Total current liabilities
|
|
|
6,270,000
|
|
|
|
229,000
|
|
Other liabilities:
|
|
|
|
|
|
|
|
|
Warrant liability
|
|
|
32,672,000
|
|
|
|
|
|
Deferred underwriting compensation
|
|
|
12,075,000
|
|
|
|
-
|
|
Total liabilities
|
|
|
51,017,000
|
|
|
|
229,000
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Class A common stock subject to possible redemption; 29,086,291 and -0- shares at June 30, 2021 and December 31, 2020, respectively, (at value of approximately $10.00 per share)
|
|
|
290,863,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value; 1,000,000 authorized shares; none issued or outstanding at June 30, 2021 and December 31, 2020, respectively
|
|
|
-
|
|
|
|
-
|
|
Class A common stock, $0.0001 par value; 200,000,000 authorized shares; 5,413,709 and -0- shares, respectively, issued and outstanding at June 30, 2021 and December 31, 2020 (excluding 29,086,291 and -0- shares, respectively, subject to possible redemption)
|
|
|
-
|
|
|
|
-
|
|
Class B common stock, $0.0001 par value, 20,000,000 authorized shares; 8,625,000 shares issued and outstanding at June 30, 2021 and December 31, 2020 (1)
|
|
|
1,000
|
|
|
|
1,000
|
|
Additional paid-in-capital
|
|
|
21,138,000
|
|
|
|
24,000
|
|
Retained earnings
|
|
|
(16,139,000
|
)
|
|
|
(3,000
|
)
|
Total stockholders’ equity
|
|
|
5,000,000
|
|
|
|
22,000
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
346,880,000
|
|
|
$
|
251,000
|
|
(1)
|
Share amounts have been retroactively restated at December 31, 2020
to reflect a stock dividend of 0.2 shares for each share of Class B common stock outstanding on January 14, 2021 (See Note 5)
|
See
accompanying notes to condensed financial statements
HENNESSY
CAPITAL INVESTMENT CORP. V
CONDENSED
STATEMENTS OF OPERATIONS
(unaudited)
|
|
For the
three months
ended
June 30,
2021
|
|
|
For the
six months
ended
June 30,
2021
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
General and administrative expenses
|
|
|
5,623,000
|
|
|
|
7,226,000
|
|
Loss from operations
|
|
|
(5,623,000
|
)
|
|
|
(7,226,000
|
)
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Interest income on Trust
|
|
|
|
|
|
|
|
|
Account
|
|
|
12,000
|
|
|
|
28,000
|
|
Warrant liability issuance costs
|
|
|
-
|
|
|
|
(639,000
|
)
|
Charge associated with issuance of private placement warrants
|
|
|
-
|
|
|
|
(832,000
|
)
|
Change in fair value of warrant liability
|
|
|
(8,090,000
|
)
|
|
|
(7,467,000
|
)
|
Loss before provision for income tax
|
|
|
(13,701,000
|
)
|
|
|
(16,136,000
|
)
|
|
|
|
|
|
|
|
|
|
Provision for income tax
|
|
|
-
|
|
|
|
-
|
|
Net loss
|
|
$
|
(13,701,000
|
)
|
|
$
|
(16,136,000
|
)
|
|
|
|
|
|
|
|
|
|
Two Class Method for Per Share Information:
|
|
|
|
|
|
|
|
|
Weighted average Class A common shares outstanding - basic and diluted
|
|
|
34,500,000
|
|
|
|
34,500,000
|
|
Net income per Class A common share – basic and diluted
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
Weighted average Class B common shares outstanding – basic and diluted
|
|
|
8,625,000
|
|
|
|
8,506,000
|
|
Net loss per Class B common share – basic and diluted
|
|
$
|
(1.59
|
)
|
|
$
|
(1.90
|
)
|
See
accompanying notes to condensed financial statements
HENNESSY
CAPITAL INVESTMENT CORP. V
CONDENSED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For
the three and six months ended June 30, 2021
(unaudited)
For
the three months ended June 30, 2021:
|
|
Common Stock
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Class A
Shares
|
|
|
Amount
|
|
|
Class B
Shares
|
|
|
Amount
|
|
|
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Stockholders’
Equity
|
|
Balances, March 31, 2021 (unudited)
|
|
|
4,043,570
|
|
|
$
|
-
|
|
|
|
8,625,000
|
|
|
$
|
1,000
|
|
|
$
|
7,437,000
|
|
|
$
|
(2,438,000
|
)
|
|
$
|
5,000,000
|
|
Change in value of Class A common stock subject to possible
redemption
|
|
|
1,370,139
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,701,000
|
|
|
|
-
|
|
|
|
(13,701,000
|
)
|
Net loss, three months ended June 30, 2021 (unaudited)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,701,000
|
)
|
|
|
(13,701,000
|
)
|
Balances, June 30, 2021 (unaudited)
|
|
|
5,413,709
|
|
|
$
|
-
|
|
|
|
8,625,000
|
|
|
$
|
1,000
|
|
|
$
|
21,138,000
|
|
|
$
|
(16,139,000
|
)
|
|
$
|
5,000,000
|
|
For
the six months ended June 30, 2021:
|
|
Common Stock
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Class A
Shares
|
|
|
Amount
|
|
|
Class B
Shares
|
|
|
Amount
|
|
|
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Stockholders’
Equity
|
|
Balances, December 31, 2020 (1)
|
|
|
-
|
|
|
$
|
-
|
|
|
|
8,625,000
|
|
|
$
|
1,000
|
|
|
$
|
24,000
|
|
|
$
|
(3,000
|
)
|
|
$
|
22,000
|
|
Sale of Units to the public at $10.00 per Unit less fair value, $13,973,000 allocated to the warrant liability
|
|
|
34,500,000
|
|
|
|
3,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
331,024,000
|
|
|
|
-
|
|
|
|
331,027,000
|
|
Underwriters’ discount and offering expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(19,050,000
|
)
|
|
|
-
|
|
|
|
(19,050,000
|
)
|
Change in value of Class A common stock subject to possible
redemption
|
|
|
(29,086,291
|
)
|
|
|
(3,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(290,860,000
|
)
|
|
|
-
|
|
|
|
(290,863,000
|
)
|
Net loss, six months ended June 30, 2021 (unaudited)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(16,136,000
|
)
|
|
|
(16,136,000
|
)
|
Balances, June 30, 2021 (unaudited)
|
|
|
5,413,709
|
|
|
$
|
-
|
|
|
|
8,625,000
|
|
|
$
|
1,000
|
|
|
$
|
21,138,000
|
|
|
$
|
(16,139,000
|
)
|
|
$
|
5,000,000
|
|
(1)
|
Share
amounts have been retroactively restated at December 31, 2020 to reflect a stock dividend
of 0.2 shares for each share of Class B common stock outstanding on January 14, 2021 (See
Note 5)
|
See
accompanying notes to condensed financial statements
HENNESSY
CAPITAL INVESTMENT CORP. V
CONDENSED
STATEMENT OF CASH FLOWS
For the six months ended June 30, 2021
(unaudited)
Cash flows from operating activities:
|
|
|
|
Net loss
|
|
$
|
(16,136,000
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
Interest income retained in Trust Account
|
|
|
(28,000
|
)
|
Warrant liability issuance costs
|
|
|
639,000
|
|
Charge associated with issuance of private placement warrants
|
|
|
832,000
|
|
Change in fair value of warrant liability
|
|
|
7,467,000
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
Increase in prepaid expenses
|
|
|
(486,000
|
)
|
Increase in accounts payable (excluding offering costs of $70,000 at June 30, 2021 and $4,000 at December 31, 2020)
|
|
|
61,000
|
|
Increase in accrued liabilities
|
|
|
5,846,000
|
|
Increase in deferred compensation
|
|
|
193,000
|
|
Increase in accrued income and franchise taxes and rounding
|
|
|
100,000
|
|
Net cash used in operating activities
|
|
|
(1,512,000
|
)
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
Cash deposited in Trust Account
|
|
|
(345,000,000
|
)
|
Net cash used in investing activities
|
|
|
(345,000,000
|
)
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
Proceeds from sale of Units to the public
|
|
|
345,000,000
|
|
Proceeds from sale of Private Placement Warrants
|
|
|
10,400,000
|
|
Payment of underwriting discounts
|
|
|
(6,900,000
|
)
|
Payment of offering costs
|
|
|
(544,000
|
)
|
Payment of Note payable to Sponsor
|
|
|
(150,000
|
)
|
Net cash provided by financing activities
|
|
|
347,806,000
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
1,294,000
|
|
Cash at beginning of period
|
|
|
72,000
|
|
Cash at end of period
|
|
$
|
1,366,000
|
|
|
|
|
|
|
Supplemental disclosure of non-cash financing activities:
|
|
|
|
|
Initial value of Class A ordinary shares subject to redemption, as restated
|
|
$
|
305,587,000
|
|
Change in value of Class A ordinary shares subject to redemption
|
|
$
|
14,724,000
|
|
Deferred underwriters’ compensation
|
|
$
|
12,075,000
|
|
Offering costs included in accounts payable
|
|
$
|
70,000
|
|
See
accompanying notes to condensed financial statements
HENNESSY CAPITAL INVESTMENT CORP. V
Notes to Condensed Financial Statements
(unaudited)
NOTE 1 – DESCRIPTION OF ORGANIZATION AND BUSINESS
OPERATIONS
Organization and General:
Hennessy Capital Investment Corp. V (the “Company”)
was incorporated in Delaware on October 6, 2020 as Hennessy Capital Acquisition Corp. V and changed its name to Hennessy Capital Investment
Corp. V on November 19, 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,” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the
“Securities Act,” as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
At
June 30, 2021, the Company had not commenced any operations. All activity for the period from October 6, 2020 (inception) to June 30,
2021 relates to the Company’s formation and the initial public offering (“Public Offering”) described below
and, subsequent to the Public Offering, identifying and completing a suitable Business Combination.
The Company will not generate any operating revenues until after completion of its initial Business Combination, at the earliest. The
Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from
the Public Offering. The Company has selected December 31 as its fiscal year end.
All dollar amounts are rounded to the nearest thousand
dollars.
Sponsor and Financing:
The Company’s sponsor is Hennessy Capital
Partners V LLC, a Delaware limited liability company (the “Sponsor”). The Company intends to finance a Business Combination
with proceeds from the $345,000,000 Public Offering (Note 4) and a $10,400,000 private placement (Note 5). Upon the closing of the Public
Offering and the private placement, $345,000,000 was placed in a trust account (the “Trust Account”).
The Trust Account:
The funds in the Trust Account are invested
only in U.S. government treasury bills with a maturity of one hundred and eighty-five (185) days or less or in money market funds meeting
certain conditions under Rule 2a-7 under the Investment Company Act of 1940 which invest only in direct U.S. government obligations.
Funds will remain in the Trust Account until the earlier of (i) the consummation of the initial Business Combination or (ii) the
distribution of the Trust Account as described below. The remaining funds outside the Trust Account may be used to pay for business, legal
and accounting due diligence on prospective acquisition targets and continuing general and administrative expenses.
The Company’s amended and restated certificate
of incorporation provides that, other than the withdrawal of interest to pay tax obligations, if any (less up to $100,000 of interest
to pay dissolution expenses), none of the funds held in trust will be released until the earliest of: (a) the completion of the initial
Business Combination, (b) the redemption of any public shares properly submitted in connection with a stockholder vote to amend the
Company’s amended and restated certificate of incorporation (i) to modify the substance or timing of the Company’s obligation
to redeem 100% of the public shares if the Company does not complete the initial Business Combination within 24 months from the closing
of the Public Offering or (ii) with respect to any other provision relating to stockholders’ rights or pre-Business Combination
activity, and (c) the redemption of the public shares if the Company is unable to complete the initial Business Combination within
24 months from the closing of the Public Offering, subject to applicable law. The proceeds deposited in the Trust Account could become
subject to the claims of creditors, if any, which could have priority over the claims of our public stockholders.
Business Combination:
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the Public Offering and the sale of the Private Placement Warrants, although
substantially all of the net proceeds of the Public Offering are intended to be generally applied toward consummating a Business Combination
with (or acquisition of) a Target Business. As used herein, “Target Business” is one or more target businesses that together
have a fair market value equal to at least 80% of the balance in the Trust Account (less the deferred underwriting commissions and taxes
payable on interest earned) at the time of signing a definitive agreement in connection with the Company’s initial Business Combination.
There is no assurance that the Company will be able to successfully effect a Business Combination.
The Company, after signing a definitive agreement
for a Business Combination, will either (i) seek stockholder approval of the Business Combination at a meeting called for such purpose
in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or against the Business Combination,
for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the
consummation of the initial Business Combination, including interest but less taxes payable, or (ii) provide stockholders with the
opportunity to have their shares redeemed by the Company by means of a tender offer (and thereby avoid the need for a stockholder vote)
for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days
prior to commencement of the tender offer, including interest but less taxes payable. The decision as to whether the Company will seek
stockholder approval of the Business Combination or will allow stockholders to sell their shares in a tender offer will be made by the
Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms
of the transaction would otherwise require the Company to seek stockholder approval unless a vote is required by the rules of the Nasdaq
Capital Market. If the Company seeks stockholder approval, it will complete its Business Combination only if a majority of the outstanding
shares of Class A and Class B common stock voted are voted in favor of the Business Combination. However, in no event will the
Company redeem its public shares in an amount that would cause its net tangible assets to be less than $5,000,001 upon consummation of
a Business Combination. In such case, the Company would not proceed with the redemption of its public shares and the related Business
Combination, and instead may search for an alternate Business Combination.
If the Company holds a stockholder vote or there
is a tender offer for shares in connection with a Business Combination, a public stockholder will have the right to redeem its shares
for an amount in cash equal to its pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days
prior to the consummation of the initial Business Combination, including interest but less taxes payable. As a result, such shares of
Class A common stock are recorded at redemption amount and classified as temporary equity upon the completion of the Public Offering,
in accordance with FASB ASC 480, “Distinguishing Liabilities from Equity.” The amount in the Trust Account was initially $10.00
per public common share ($345,000,000 held in the Trust Account divided by 34,500,000 public shares).
The Company will only have 24 months from the closing
date of the Public Offering, or until January 20, 2023, to complete its initial Business Combination. If the Company does not complete
a Business Combination within this period of time, it shall (i) cease all operations except for the purposes of winding up; (ii) as
promptly as reasonably possible, but not more than ten business days thereafter, redeem the public shares of Class A common stock
for a per share pro rata portion of the Trust Account, including interest, but less taxes payable (less up to $100,000 of such net interest
to pay dissolution expenses) and (iii) as promptly as possible following such redemption, dissolve and liquidate the balance of the
Company’s net assets to its creditors and remaining stockholders, as part of its plan of dissolution and liquidation. The initial
stockholders have waived their rights to participate in any redemption with respect to their Founder Shares (as defined in Note 5); however,
if the initial stockholders or any of the Company’s officers, directors or affiliates acquire shares of Class A common stock
after the Public Offering, they will be entitled to a pro rata share of the Trust Account upon the Company’s redemption or liquidation
in the event the Company does not complete a Business Combination within 24 months from the closing of the Public Offering.
In the event of such distribution, it is possible
that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than
the price per Unit in the Public Offering.
NOTE 2 – MERGER AGREEMENT AND PLAN OF REORGANIZATION; PIPE
FINANCING; SUBSCRIPTIONS AGREEMENTS
Merger Agreement and Plan of Reorganization
On May 7, 2021, the Company entered into a Merger Agreement and Plan
of Reorganization (the “Merger Agreement”) to effect an initial business combination, by and among the Company, PlusAI Corp,
an exempted company incorporated with limited liability in the Cayman Islands (“Plus”), Plus Inc., an exempted company incorporated
with limited liability in the Cayman Islands (“PubCo”), Prime Merger Sub I, Inc., an exempted company incorporated with limited
liability in the Cayman Islands and a direct, wholly-owned subsidiary of PubCo (“First Merger Sub”), Prime Merger Sub II,
Inc., a Delaware corporation and wholly-owned subsidiary of PubCo (“Second Merger Sub”), and Plus Holdings Ltd., an exempted
company incorporated with limited liability in the Cayman Islands and wholly-owned subsidiary of Plus (“Plus Holdings”).
Pursuant to the Merger Agreement, a business combination between the
Company and Plus (the “Business Combination”) will be effected through (a) the merger of Prime Merger Sub, Ltd., an exempted
company incorporated with limited liability in the Cayman Islands and wholly-owned subsidiary of Plus Holdings, with and into Plus, with
Plus surviving as a wholly-owned subsidiary of Plus Holdings (the “F-Reorg Merger”); (b) following the F-Reorg Merger, the
merger of First Merger Sub with and into Plus Holdings, with Plus Holdings surviving as a wholly-owned subsidiary of PubCo (the “Plus
Merger”); and (c) simultaneously with, and as part of the same overall transaction as the Plus Merger, the merger of Second Merger
Sub with and into the Company, with the Company surviving as a wholly-owned subsidiary of PubCo (the “HCIC Merger” and, together
with the Plus Merger, the “Mergers”). As a result of the Mergers, Plus Holdings and the Company each will become a direct
wholly-owned subsidiary of PubCo, Plus will become a direct wholly-owned subsidiary of Plus Holdings and PubCo will become a publicly
traded company.
Plus is a global provider of self-driving truck technology aimed at
making trucks safer, more efficient, more comfortable, and better for the environment using its autonomous driving solution PlusDrive
advanced sensing technologies, including radar, lidar, and cameras to provide a 360-degree sensing system. Plus plans to begin mass production
of PlusDrive, starting in 2021 with FAW, a heavy-truck manufacturer. Plus is headquartered in Cupertino, California.
Under the terms of the Merger Agreement, the aggregate consideration
to be paid to existing Plus shareholders as a result of the F-Reorg Merger and Plus Merger is expected to be up to approximately 272 million
shares of newly issued ordinary shares of PubCo, par value of $0.000002, designated as Class A Ordinary Shares, which are expected to
have one (1) vote per share (“PubCo Class A Ordinary Shares”) and ordinary shares of PubCo, par value of $0.000002, designated
as Class B Ordinary Shares, which are expected to have eight (8) votes per share (“PubCo Class B Ordinary Shares” and together
with the PubCo Class A Ordinary Shares, “PubCo Shares”), with such PubCo Shares valued at $10 per share. A portion of the
aggregate consideration of PubCo Shares will be subject to forfeiture restrictions or other restrictions or in the form of options or
warrants of PubCo, in each case to the same extent to which the securities of existing Plus securityholders are subject to forfeiture
restrictions or other restrictions or held in the form of options or warrants.
As a result of the HCIC Merger, (a) each outstanding share of the Company’s
common stock will be cancelled in exchange for the right to receive for one PubCo Class A Ordinary Share, and (b) each outstanding warrant
of the Company will become exercisable for one PubCo Class A Ordinary Share on the same terms and conditions.
In connection with the execution of the Merger Agreement, on May 7,
2021, the Company and PubCo entered into separate subscription agreements (the “PIPE Subscription Agreements”) with a number
of investors (the “PIPE Investors”), pursuant to which the PIPE Investors have agreed to subscribe for and purchase, and PubCo
has agreed to issue and sell to the PIPE Investors, an aggregate of 15 million PubCo Class A Ordinary Shares (the “PIPE Shares”),
for a purchase price of $10.00 per share and at an aggregate purchase price of $150 million in a private placement (the “PIPE Financing”).
The consummation of the Business Combination (the “Closing”)
is subject to certain conditions, including but not limited to the approval of the Company’s stockholders and Plus’ shareholders
of the Merger Agreement. The Merger Agreement may also be terminated by either party under certain circumstances, including upon notice
after November 8, 2021. The parties have agreed to customary exclusivity obligations by either party for any reason. The Closing is expected
to occur as promptly as practicable, but in no event later than three business days following the satisfaction or waiver of all of the
closing conditions contained in the Merger Agreement. The Company anticipates the Closing will occur in the second half of 2021 but
can provide no assurances that the Closing will occur timely or at all.
Additional information regarding the proposed Business Combination
and the business and operations of Plus is contained in the Current Report on Form 8-K filed by the Company on May 10, 2021 and will be
available in the Registration Statement on Form F-4 once filed publicly by PubCo with the Securities and Exchange Commission.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation:
The accompanying unaudited condensed interim financial
statements of the Company are presented in U.S. dollars and in conformity with accounting principles generally accepted in the United
States of America (“GAAP”) pursuant to the rules and regulations of the SEC and reflect all adjustments, consisting only of
normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position as
of June 30, 2021, and the results of operations and cash flows for the periods presented. Certain information and disclosures normally
included in financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. Interim results
are not necessarily indicative of results for a full year.
The accompanying unaudited condensed interim financial
statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s final
prospectus dated January 14, 2021.
Liquidity and capital resources:
At June 30, 2021, the Company has approximately
$1,366,000 in cash, approximately $6,270,000 of current liabilities and approximately $4,418,000 in negative working capital. The Company has incurred and expects to continue to incur significant
costs in pursuit of its Business Combination. These conditions raise substantial doubt about the Company's ability to continue as a going
concern for a period of time within one year after the date that the financial statements are issued. There is no assurance that the Company's
plans to consummate a Business Combination will be successful or successful within the Combination Period. The financial statements do
not include any adjustments that might result from the outcome of this uncertainty.
Emerging Growth Company:
Section 102(b)(1) of the JOBS Act exempts emerging
growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those
that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the
Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can
elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any
such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that
when an accounting standard is issued or revised and it has different application dates for public or private companies, the Company,
as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company
nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential
differences in accounting standards used.
Net Income (Loss) Per Common Share:
Net
income (loss) per common share is computed by dividing net income (loss) applicable to common stockholders by the weighted average number
of common shares outstanding during the period as calculated using the treasury stock method. The Company has not considered the
effect of the warrants sold in the Public Offering and the Private Placement to purchase an aggregate of 15,558,333 shares of Class A
common stock in the calculation of diluted income (loss) per share, since their inclusion would be anti-dilutive under the treasury stock
method. As a result, diluted income (loss) per common share is the same as basic loss per common share for the period.
The Company’s condensed statement of operations
include a presentation of income (loss) per share for common stock subject to redemption in a manner similar to the two-class method of
income (loss) per share. Net income (loss) per share, basic and diluted for Class A common stock is calculated by dividing the interest
income earned on the funds in the Trust Account, net of income tax and franchise tax expense, by the weighted average number of shares
of Class A common stock outstanding since their original issuance. Net income (loss) per common share, basic and diluted, for shares of
Class B common stock is calculated by dividing the net income (loss), less income attributable to Class A common stock, by the weighted
average number of shares of Class B common stock outstanding for the period. Net income (loss) available to each class of common stockholders
is as follows for the three and six months ended June 30, 2021:
|
|
Three Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
2021
|
|
|
June 30,
2021
|
|
Net income available to Class A common stockholders:
|
|
|
|
|
|
|
Interest income
|
|
$
|
12,000
|
|
|
$
|
28,000
|
|
Less: Income and franchise taxes (limited to income)
|
|
|
(12,000
|
)
|
|
|
(28,000
|
)
|
Net income attributable to Class A common stockholders
|
|
$
|
-
|
|
|
$
|
-
|
|
Weighted average Class A common shares outstanding - basic and diluted
|
|
|
34,500,000
|
|
|
|
34,500,000
|
|
Net income per Class A common share – basic and diluted
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
Net loss available to Class B common stockholders:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(13,701,000
|
)
|
|
$
|
(16,136,000
|
)
|
Less: amount attributable to Class A common stockholders
|
|
|
-
|
|
|
|
-
|
|
Net (loss) attributable to Class B common stockholders
|
|
$
|
(13,701,000
|
)
|
|
$
|
16,136,000
|
|
Weighted average Class B common shares outstanding – basic and
diluted
|
|
|
8,625,000
|
|
|
|
8,506,000
|
|
Net loss per Class B common share – basic and diluted
|
|
$
|
(1.59
|
)
|
|
$
|
(1.90
|
)
|
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 Deposit
Insurance Corporation maximum coverage of $250,000. The Company has not experienced losses on these accounts and management believes the
Company is not exposed to significant risks on such accounts.
Financial Instruments:
The fair value of the Company’s assets and
liabilities (excluding the warrant liability), which qualify as financial instruments under FASB Accounting Standards Codification (“ASC”)
820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the condensed financial statements
primarily due to their short-term nature.
Use of Estimates:
The preparation of condensed financial statements in conformity
with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts
of expenses during the reporting period.
Making estimates requires management to exercise
significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances
that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near
term due to one or more future confirming events. One of the more significant estimates included in these financial statements is the
determination of the fair value of the warrant liability. Such estimates may be subject to change as more current information becomes
available and accordingly the actual results could differ significantly from those estimates.
Deferred Offering Costs:
The
Company complies with the requirements of the FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A —
“Expenses of Offering.” Costs incurred in connection with preparation for the Public Offering were approximately
$19,689,000, including the underwriters discount of $18,975,000. Such costs were allocated among the equity and warrant
liability components based on their fair values and approximately
$19,050,000 of such costs have been charged to equity and the remainder, approximately $639,000, have been charged to the condensed
statement of operations upon completion of the Public Offering in January 2021.
Income Taxes:
The Company follows the asset and liability method
of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for
the estimated future tax consequences attributable to differences between the financial statements 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.
The Company’s currently taxable income
consists of interest income on the Trust Account net of taxes. The Company’s general and administrative costs are generally
considered start-up costs and are not currently deductible. During the three and six months ended June 30, 2021, and December 31,
2021 the Company recorded income tax expense of approximately $-0- in both periods because the cost of deductible franchise taxes
exceeded the interest income earned on the Trust Account so there was no income for tax purposes. The Company’s effective tax
rate for the three and six months ended June 30, 2021 was approximately -0-% in both periods which differs from the expected income
tax rate due to the start-up costs (discussed above) which are not currently deductible and business combination and warrant costs
which may not be deductible. At June 30, 2021 and December 31, 2020, the Company has a deferred tax asset of approximately $190,000
and $-0-, respectively, primarily related to start-up costs. Management has determined that a full valuation allowance of the
deferred tax asset is appropriate at this time.
FASB ASC 740 prescribes a recognition threshold and a measurement
attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For
those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. There
were no unrecognized tax benefits as of June 30, 2021. 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 at 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.
Redeemable Common Stock:
As discussed in Note 4, all of the 34,500,000 public
shares sold as part of Units in the Public Offering contain a redemption feature which allows for the redemption of public shares if the
Company holds a stockholder vote or there is a tender offer for shares in connection with a Business Combination. In accordance with FASB
ASC 480, redemption provisions not solely within the control of the Company require the security to be classified outside of permanent
equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are
excluded from the provisions of FASB ASC 480. Although the Company did not specify a maximum redemption threshold, its charter provides
that in no event will it redeem its public shares in an amount that would cause its net tangible assets (stockholders’ equity) to
be less than $5,000,001 upon the closing of a Business Combination.
The Company recognizes changes in redemption
value immediately as they occur and adjusts the carrying value of the securities at the end of each reporting period. Increases or decreases
in the carrying amount of redeemable common stock are affected by adjustments to additional paid-in capital. Accordingly, at June 30,
2021, 29,086,291 of the 34,500,000 public shares were classified outside of permanent equity. At December 31, 2020, there were no shares of Class A common stock outstanding or redeemable.
Warrant Liability
The Company accounts
for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms
and applicable authoritative guidance FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives
and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant
to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification
under ASC 815, including whether the warrants are indexed to the Company’s own shares, among other conditions for equity classification.
This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent
quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet
all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital
at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants
are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in
the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. Costs associated
with issuing the warrants accounted for as liabilities are charged to operations when the warrants are issued. The fair value of the
warrants was estimated in both the initial and subsequent periods using a Monte Carlo simulation approach for the private warrants
and the public warrants are valued based on public trading in an open market.
Recent Accounting Pronouncements:
In August 2020, the FASB issued ASU 2020-06,
Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s
Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates
the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies
the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard
also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s
own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for
all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis,
with early adoption permitted beginning on January 1, 2021. The Company is currently evaluating the impact that the pronouncement will
have on the financial statements.
Management does not believe that any other recently
issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial
statements.
Subsequent Events:
Management has evaluated subsequent events and transactions
that occurred after the balance sheet date and up to the date that the financial statements were issued and has concluded
that all such events that would require adjustment or disclosure have been recognized or disclosed.
NOTE 4 – PUBLIC OFFERING
On January 20, 2021, the Company completed the sale
of 34,500,000 units at a price of $10.00 per unit (the “Units”). Each Unit consists of one share of the Company’s Class A
common stock, $0.0001 par value and one-fourth of one redeemable warrant (the “Warrants”). Each whole Warrant offered in the
Public Offering is exercisable to purchase one share of Class A common stock at $11.50 per share. Under the terms of a warrant agreement,
the Company has agreed to use its best efforts to file a new registration statement under the Securities Act, following the completion
of the Company’s initial Business Combination. No fractional Warrants will be issued upon separation of the Units and only whole
Warrants will trade. Accordingly, unless a holder owns a multiple of four Units, the number of Warrants issuable to such holder upon separation
of the Units will be rounded down to the nearest whole number of Warrants. Each Warrant 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 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 Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Warrants
on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Company has agreed that as soon
as practicable, but in no event later than 15 business days after the closing of the initial Business Combination, the Company will use
its best efforts to file with the SEC and have an effective registration statement covering the shares of Class A common stock issuable
upon exercise of the Warrants and to maintain a current prospectus relating to those shares of Class A common stock until the Warrants
expire or are redeemed. If a registration statement covering 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. Notwithstanding the above, if the Company’s shares of Class A common stock are at the time of any exercise of a
warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1)
of the Securities Act, the Company may, at its option, require holders of Warrants who exercise their warrants to do so on a “cashless
basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, it will not be required
to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will use its best efforts to
register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
The
warrants have an exercise price of $11.50 per 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 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 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
or any anchor investors, without taking into account any founder shares or warrants held by our initial stockholders or such affiliates,
as applicable, or our anchor investors, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds
from such issuances represent more than 60% of the total equity proceeds, and
interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business
Combination (net of redemptions), and (z) the volume weighted average trading price of Class A common stock during the 20 trading
day period starting on the trading day prior to the day on which the Company consummates 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, the $18.00 per share redemption trigger price will be adjusted
(to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption
trigger price will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
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 for cash (except as described herein with respect to the Private
Placement Warrants):
|
●
|
in whole and not in part;
|
|
●
|
at a price of $0.01 per Warrant;
|
|
●
|
upon a minimum of 30 days’ prior written notice
of redemption; and
|
|
●
|
if, and only if, the closing price of Class A common
stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like)
for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the
notice of redemption to the Warrant holders (the “Reference Value”).
|
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 with respect to the Private Placement Warrants):
|
●
|
in whole and not in part;
|
|
●
|
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
the shares of Class A common stock; and
|
|
●
|
if, and only if, the closing price of the shares of Class A
common stock equals or exceeds $10.00 per public share (as adjusted) on the trading day prior to the date on which the Company sends
the notice of redemption to the warrant holders;
|
|
●
|
if the Reference Value is less than $18.00 per share (as
adjusted for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like), then the
Private Placement Warrants must also concurrently be called for redemption on the same terms (except as described herein with respect
to a holder’s ability to cashless exercise its warrants) as the outstanding Warrants.
|
In no event will the Company be required to net
cash settle any warrant. If the Company is unable to complete a Business Combination by January 20, 2023, 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 Company granted the underwriters a 45-day option
to purchase up to 4,500,000 additional Units to cover any over-allotments, at the Public Offering price less the underwriting discounts
and commissions. The underwriters exercised their over-allotment option in full. The Warrants that were issued in connection with the
4,500,000 over-allotment units are identical to the public Warrants and have no net cash settlement provisions.
The Company paid an underwriting discount of 2.0%
of the per Unit price to the underwriters at the closing of the Public Offering, or $6,900,000, with an additional fee (the “Deferred
Discount”) of 3.5%, or $12,075,000, of the gross offering proceeds is payable upon the consummation of the initial Business Combination.
The Deferred Discount will become payable to the underwriters from the amounts held in the Trust Account solely in the event the Company
completes its initial Business Combination.
The Company intends to finance a Business Combination
with proceeds from the $345,000,000 Public Offering and a $10,400,000 private placement (Note 5), net of expenses of the offering and
amounts allocated to working capital. Upon the closing of the Public Offering and the private placement, net proceeds of $345,000,000
were placed in the Trust Account.
NOTE 5 – RELATED PARTY TRANSACTIONS
Founder Shares
In October 2020 the Sponsor purchased 7,187,500
shares of Class B common stock (the “Founder Shares”) for $25,000, or approximately $0.003 per share (up to 937,500 of
which were subject to forfeiture to the extent the underwriters’ over-allotment option was not exercised in full). In January 2021,
the Sponsor transferred an aggregate of 1,450,000, Founder Shares to the Company’s officers, directors and advisors. The Founder
Shares are identical to the Class A common stock included in the Units being sold in the Public Offering except that the Founder
Shares automatically convert into shares of Class A common stock at the time of the initial Business Combination and are subject
to certain transfer restrictions, as described in more detail below. In January 2021, the Company effected a stock dividend of 0.2 shares
for each share of Class B common stock, resulting in the Company’s initial stockholders holding an aggregate of 8,625,000 Founder
Shares. Certain of the transferees of the initial stockholders (discussed above) then transferred an aggregate of 290,000 shares back
to the Sponsor. The January 2021 stock dividend is retroactively restated in the accompanying financial statements at December 31, 2020.
The Sponsor had agreed to forfeit up to 1,125,000 Founder Shares to the extent that the over-allotment option was not exercised in full
by the underwriters. The over-allotment option was exercised in full and therefore no shares were forfeited and this contingency has lapsed.
The Company’s initial stockholders have agreed
not to transfer, assign or sell any of their Founder Shares until the earlier of (A) one year after the completion of the Company’s
initial Business Combination, or (B), subsequent to the Company’s initial Business Combination, if (x) the last reported sale
price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days
after the Company’s initial Business Combination or (y) the date on which the Company completes a liquidation, merger, stock
exchange or other similar transaction after the initial Business Combination that results in all of the Company’s stockholders having
the right to exchange their shares of common stock for cash, securities or other property.
Private Placement Warrants
The Sponsor and certain funds and accounts managed
by subsidiaries of BlackRock, Inc. and D. E. Shaw Valence Portfolios, L.L.C. (collectively, the “Direct Anchor Investors”)
purchased from the Company an aggregate of 6,933,333 warrants at a price of $1.50 per warrant (a purchase price of $10,400,000), in a
private placement that occurred simultaneously with the completion of the Public Offering (the “Private Placement Warrants”).
The Sponsor purchased 4,853,333 Private Placement Warrants and the Direct Anchor Investors purchased 2,080,000 Private Placement Warrants.
Each Private Placement Warrant entitles the holder to purchase one share of Class A common stock at $11.50 per share. A portion of
the purchase price of the Private Placement Warrants was added to the proceeds from the Public Offering held in the Trust Account pending
completion of the Company’s initial Business Combination. The Private Placement Warrants (including the 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 the initial Business Combination and they will be non-redeemable so long as they are held by the Sponsor, the Direct Anchor
Investors or their permitted transferees. If the Private Placement Warrants are held by someone other than the Sponsor, the Direct Anchor
Investors or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders
on the same basis as the warrants included in the Units being sold in the Public Offering. Otherwise, the Private Placement Warrants have
terms and provisions that are identical to those of the Warrants being sold as part of the Units in the Public Offering and have no net
cash settlement provisions.
In
addition, if the Company issues additional shares of common stock or equity-linked securities for capital raising purposes in connection
with the closing of its initial Business Combination at a newly issued price of less than $9.20 per share of common stock (with such issue
price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance
to its initial stockholders or their affiliates or any anchor investors, without taking into account any founder shares or warrants
held by our initial stockholders or such affiliates, as applicable, or our anchor investors, prior to such issuance) (the
“newly issued price”), the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the
newly issued price.
If the Company does not complete a Business Combination,
then the proceeds from the sale of the Private Placement Warrants will be part of the liquidating distribution to the public stockholders
and the Private Placement Warrants issued to the Sponsor and the Direct Anchor Investors will expire worthless.
Registration Rights
The Company’s initial stockholders and the
holders of the Private Placement Warrants are entitled to registration rights pursuant to a registration rights agreement signed on the
date of the prospectus for the Public Offering. These holders are entitled to make up to three demands, excluding short form registration
demands, that the Company register such securities for sale under the Securities Act. In addition, these holders have “piggy-back”
registration rights to include their securities in other registration statements filed by the Company. The Company will bear the expenses
incurred in connection with the filing of any such registration statements. There will be no penalties associated with delays in registering
the securities under the registration rights agreement.
Related Party Loans
In October 2020, the Sponsor agreed to loan
the Company an aggregate of $500,000 by drawdowns of not less than $10,000 each against the issuance of an unsecured promissory note (the
“Note”) to cover expenses related to the Public Offering. In December 2020, the Company borrowed approximately $150,000 under
the Note in order to fund a portion of the costs of the Public Offering. The Note was non-interest bearing and payable on the earlier
of June 30, 2021 or the completion of the Public Offering. The Note was repaid in full at the January 20, 2021 closing of the Public Offering
and no amounts are outstanding under the Note at June 30, 2021. Because the Note was payable on the earlier of June 30, 2021 or the completion of the Public Offering and both the date and the event
(the completion of the Public Offering) have passed, this Note is no longer available to the Company.
Administrative Support Agreement
The Company has agreed to pay $15,000 a month for
office space, utilities and secretarial and administrative support to an affiliate of the Sponsor, Hennessy Capital Group LLC. Services
commenced on the date the securities were first listed on the Nasdaq Capital Market and will terminate upon the earlier of the consummation
by the Company of an initial Business Combination or the liquidation of the Company. Approximately $45,000 and 83,000, respectively, was
charged to general and administrative expenses in the three and six months ended June 30, 2021.
Also, commencing on the date the securities were
first listed on the Nasdaq Capital Market, the Company agreed to compensate each of its President and Chief Operating Officer as well
as its Chief Financial Officer $29,000 per month prior to the consummation of the Company’s initial Business Combination, of which
$14,000 per month is payable upon the completion of the Company’s initial Business Combination and $15,000 per month is payable
currently for their services. During the three and six months ended June 30, 2021, $90,000 and $166,000, respectively, was paid and $155,000
was included in accrued deferred compensation at June 30, 2021 for these obligations.
NOTE 6 – TRUST ACCOUNT AND FAIR VALUE MEASUREMENT
The Company complies with FASB ASC 820, Fair Value
Measurements, for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial
assets and liabilities that are re-measured and reported at fair value at least annually.
Upon the closing of the Public Offering and the
Private Placement, a total of $345,000,000 was deposited into the Trust Account. The proceeds in the Trust Account may be invested in
either U.S. government treasury bills with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule
2a-7 under the Investment Company Act of 1940, as amended, and that invest solely in U.S. government treasury obligations.
At June 30, 2021, the proceeds of the Trust Account
were invested primarily in money market funds meeting certain conditions described above yielding interest of less than 0.1% per year.
The Company classifies its U.S. government treasury bills and equivalent securities as held-to-maturity in accordance with FASB ASC 320,
“Investments – Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the
ability and intent to hold until maturity. Held-to-maturity U.S. government treasury bills are recorded at amortized cost on the accompanying
June 30, 2021 condensed balance sheet and adjusted for the amortization of discounts.
The following table presents information about
the Company’s assets 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 the Company utilized to determine such fair value. Since all of the Company’s permitted investments
at June 30, 2021 consisted of U.S. government treasury bills and money market funds that invest only in U.S. government treasury bills,
fair values of its investments are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assets
or liabilities as follows:
Description
|
|
Carrying value at
June 30, 2021
|
|
|
Gross Unrealized
Holding Gains
|
|
|
Quoted Price
Prices in
Active Markets
(Level 1)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Cash and money market funds
|
|
$
|
345,028,000
|
|
|
$
|
-
|
|
|
$
|
345,028,000
|
|
There were no assets held in the Trust Account at December 31, 2020.
NOTE 7 – ACCOUNTING FOR WARRANT LIABILITY, CORRECTION
OF PREVIOUSLY ISSUED BALANCE SHEET, FAIR VALUE MEASUREMENT
At June 30, 2021, there were 15,558,333 warrants
outstanding including 8,625,000 Public Warrants and 6,933,333 Private Placement Warrants.
The Company accounts for its warrants outstanding
consistent with the “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition
Companies” (the “Staff Statement”) issued on April 12, 2021 by the staff (the “Staff”) of the Division of
Corporation Finance of the SEC. The Staff Statement, among other things, highlights the potential accounting implications of certain terms
that are common in warrants issued in connection with the initial public offerings of special purpose acquisition companies (“SPAC”)
such as the Company. The Staff Statement reflects the Staff’s view that in many cases, warrants issued by SPACs should be characterized
as liabilities for accounting purposes, rather than as equity securities, unless certain conditions are met. As a result of this guidance,
the Company’s management further evaluated its warrants under ASC Subtopic 815-40, Contracts in Entity’s Own Equity, including
the assistance of accounting and valuation consultants and concluded that the Company’s warrants are not indexed to the Company’s
shares in the manner contemplated by ASC Section 815-40-15 because the holder of the instrument is not an input into the pricing of a
fixed-for-fixed option on equity shares.
In addition, the impact to the balance sheet
as of January 20, 2021 prepared in connection with the Public Offering and filed in a Current Report on Form 8-K with the SEC on
January 26, 2021 (the “Form 8-K) related to the impact of accounting for warrants as liabilities at fair value resulted in
approximately a $25,205,000 increase to the warrant liabilities line item at January 20, 2021 and an offsetting decrease to the
Class A common stock subject to redemption. There is no change to total stockholders’ equity at any reported balance
sheet date. In addition, the Company has recorded approximately $1,471,000 of costs to the statement of operations at inception of
the warrants to reflect (i) approximately $639,000 of warrant issuance costs and (ii) approximately $832,000 charge for costs
associated with the issuance of the private placement warrants to the Sponsor for the difference between the price paid for the
warrants and the fair value at that date.
The following table presents information about
the Company’s warrant liabilities that are measured at fair value on a recurring basis at June 30, 2021 and indicates the fair value
hierarchy of the valuation inputs the Company utilized to determine such fair value.
Description
|
|
June
30,
2021
|
|
|
Quoted Prices
in Active
Markets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Other
Unobservable
Inputs
(Level 3)
|
|
Warrant Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Public Warrants
|
|
$
|
18,112,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
18,112,000
|
|
Private Placement Warrants
|
|
$
|
14,560,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,560,000
|
|
Warrant liability at June 30, 2021
|
|
$
|
32,672,000
|
|
|
|
|
|
|
|
|
|
|
$
|
32,672,000
|
|
The Company utilizes an independent valuation
consultant that uses a Monte Carlo simulation model with Geometric Brownian motion to value the warrants at each reporting period, with
changes in fair value recognized in the statement of operations. The estimated fair value of the warrant liability is determined using
Level 3 inputs. Inherent in a Monte Carlo simulation options pricing model are assumptions related to expected share-price volatility,
expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its shares based on historical volatility
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
to remain at zero.
The warrant liabilities are not subject to qualified
hedge accounting.
There were no transfers between Levels 1, 2 or
3 during the three and six month period ended June 30, 2021.
The following table provides quantitative information
regarding Level 3 fair value measurements:
|
|
At
June 30,
2021
|
|
|
At
January 20,
2021
(Initial
Measurement)
|
|
Stock price
|
|
$
|
10.11
|
|
|
$
|
10.00
|
|
Strike price
|
|
$
|
11.50
|
|
|
$
|
11.50
|
|
Term (in years)
|
|
|
5.0
|
|
|
|
5.0
|
|
Volatility
|
|
|
30
|
%
|
|
|
30
|
%
|
Risk-free rate
|
|
|
0.91
|
%
|
|
|
0.62
|
%
|
Probability of acquisition
|
|
|
95
|
%
|
|
|
75
|
%
|
Fair value of warrants
|
|
$
|
2.10
|
|
|
$
|
1.62
|
|
The following table presents the changes in the fair value
of warrant liabilities:
|
|
Public
|
|
|
Private
Placement
|
|
|
Warrant
Liabilities
|
|
Fair value at January 1, 2021
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Initial measurement on January 20, 2021
|
|
$
|
13,973,000
|
|
|
$
|
11,232,000
|
|
|
$
|
25,205,000
|
|
Change in valuation inputs or other assumptions
|
|
|
(346,000
|
)
|
|
|
(277,000
|
)
|
|
|
(623,000
|
)
|
Fair value as of March 31, 2021
|
|
$
|
13,627,000
|
|
|
$
|
10,955,000
|
|
|
$
|
24,582,000
|
|
Change in valuation inputs or other assumptions
|
|
|
4,485,000
|
|
|
|
3,605,000
|
|
|
|
8,090,000
|
|
Fair value as of June 30, 2021
|
|
$
|
18,112,000
|
|
|
$
|
14,560,000
|
|
|
$
|
32,672,000
|
|
NOTE 8 – STOCKHOLDERS’ EQUITY
Common Stock
The authorized common stock of the Company is 220,000,000
shares, including 200,000,000 shares of Class A common stock, par value, $0.0001, and 20,000,000 shares of Class B common stock,
par value, $0.0001. Upon completion of the Public Offering, the Company may (depending on the terms of the Business Combination) be required
to increase the authorized number of shares at the same time as its stockholders vote on the Business Combination to the extent the Company
seeks stockholder approval in connection with its Business Combination. Holders of the Company’s Class A and Class B common
stock vote together as a single class and are entitled to one vote for each share of Class A and Class B common stock.
At June 30, 2021 and December 31, 2020, there were 8,625,000 shares of Class B common stock issued and outstanding for both periods
and 5,413,709 and -0- shares, respectively, of Class A common stock issued and outstanding (excluding 29,086,291 and -0- shares,
respectively, subject to possible redemption at June 30, 2021 and December 31, 2020).
The 1,125,000 shares of Class B common stock which
were subject to forfeiture at December 31, 2020 (as described in Note 5) are no longer subject to forfeiture as the underwriters exercised
their over-allotment option in full in January 2021.
Preferred Stock
The Company is authorized to issue 1,000,000 shares
of preferred stock, par value $0.0001, with such designations, voting and other rights and preferences as may be determined from time
to time by the Company’s board of directors. At June 30, 2021 and December 31, 2020, there were no shares of preferred stock issued
or outstanding.
NOTE 9 – COMMITMENTS AND CONTINGENCIES
Business Combination Costs
In connection with identifying an initial Business
Combination candidate and negotiating an initial Business Combination, the Company has entered into, and expects to enter into additional,
engagement letters or agreements with various consultants, advisors, professionals and others. The services under these engagement letters
and agreements are material in amount and in some instances include contingent or success fees. Contingent or success fees (but not deferred
underwriting compensation) would be charged to operations in the quarter that an initial Business Combination is consummated. In most
instances (except with respect to our independent registered public accounting firm), these engagement letters and agreements are expected
to specifically provide that such counterparties waive their rights to seek repayment from the funds in the Trust Account.
Risks and Uncertainties – COVID-19
Management is currently evaluating the impact of
the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the pandemic could have an effect on
the Company’s financial position, results of its operations, and/or search for a target company and/or a target company’s
financial position and results of its operations, and the closing of a business combination, the specific impact is not readily determinable
as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome
of this uncertainty.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the
Company’s financial condition and results of operations should be read in conjunction with the condensed financial statements and
the notes thereto contained elsewhere in this report.
Special Note Regarding Forward-Looking Statements
All statements other than statements of historical
fact included in this section and elsewhere in this Form 10-Q regarding the Company’s financial position, business strategy and
the plans and objectives of management for future operations, are forward-looking statements. When used in this Form 10-Q, words such
as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions,
as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based
on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management.
Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed
in our filings with the SEC.
Overview
We are a blank check company incorporated as
a Delaware corporation on October 6, 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 (“Initial Business Combination”). We intend to effectuate our Initial Business Combination using cash
from the proceeds of our initial public offering that was completed in January
2021 (the “Public Offering”) and the sale of warrants in a private placement (the “Private Placement”) that occurred
simultaneously with the completion of the Public Offering (the “Private Placement Warrants”), our capital stock, debt or
a combination of cash, stock and debt.
The
issuance of additional shares of our stock in an Initial Business Combination:
|
●
|
may
significantly dilute the equity interest of our stockholders;
|
|
●
|
may
subordinate the rights of holders of our common stock if preferred stock is issued with rights
senior to those afforded our common stock;
|
|
●
|
could
cause a change in control if a substantial number of shares of our common stock is issued,
which may affect, among other things, our ability to use our net operating loss carry forwards,
if any, and could result in the resignation or removal of our present officers and directors;
|
|
●
|
may
have the effect of delaying or preventing a change of control of us by diluting the stock
ownership or voting rights of a person seeking to obtain control of us; and
|
|
●
|
may
adversely affect prevailing market prices for our Class A common stock and/or warrants.
|
Similarly,
if we issue debt securities or incur other indebtedness to finance our Initial Business Combination, it could result in:
|
●
|
default
and foreclosure on our assets if our operating revenues after an Initial Business Combination
are insufficient to repay our debt obligations;
|
|
●
|
acceleration
of our obligations to repay the indebtedness even if we make all principal and interest payments
when due if we breach certain covenants that require the maintenance of certain financial
ratios or reserves without a waiver or renegotiation of that covenant;
|
|
●
|
our
immediate payment of all principal and accrued interest, if any, if the debt security is
payable on demand;
|
|
●
|
our
inability to obtain necessary additional financing if the debt security or other indebtedness
contains covenants restricting our ability to obtain such financing while the debt security
or other indebtedness is outstanding;
|
|
●
|
our
inability to pay dividends on our common stock;
|
|
●
|
using
a substantial portion of our cash flow to pay principal and interest on our debt, which will
reduce the funds available for dividends on our common stock if declared, or limit our ability
to pay expenses, make capital expenditures and acquisitions and fund other general corporate
purposes;
|
|
●
|
limitations
on our flexibility in planning for and reacting to changes in our business and in the industry
in which we operate;
|
|
●
|
increased
vulnerability to adverse changes in general economic, industry and competitive conditions
and adverse changes in government regulation;
|
|
●
|
limitations
on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions,
debt service requirements, execution of our strategy and other purposes and
|
|
●
|
other
disadvantages compared to our competitors who have less debt.
|
At
June 30, 2021, we had approximately $1,366,000 in cash outside of the Trust Account. We are incurring and expect to incur significant
costs in the pursuit of an Initial Business Combination and we cannot assure you that our plans to complete an Initial Business Combination
will be successful.
Recent
Developments – COVID-19
In
December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout
other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak
of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health
and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community
in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic.”
COVID-19 has resulted in a widespread health crisis that has adversely affected the economies and financial markets worldwide. The business
of the target business with which we consummate a business combination could be materially and adversely affected. Furthermore, we may
be unable to complete a business combination if continued concerns relating to COVID-19 restrict travel, limit the ability to have meetings
with potential investors or the target company’s personnel, vendors and services providers are unavailable to negotiate and consummate
a transaction in a timely manner. The extent to which COVID-19 impacts our search for a business combination will depend on future developments,
which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and
the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other matters of global concern
continue for an extended period of time, our ability to consummate a business combination, or the operations of a target business with
which we ultimately consummate a business combination, may be materially adversely affected.
Recent Developments – Entry into Merger
Agreement and Plan of Reorganization; PIPE Financing Subscription Agreements
On May 7, 2021, the Company entered into a Merger
Agreement and Plan of Reorganization (the “Merger Agreement”) to effect an initial business combination, by and among the
Company, PlusAI Corp, an exempted company incorporated with limited liability in the Cayman Islands (“Plus”), Plus Inc., an
exempted company incorporated with limited liability in the Cayman Islands (“PubCo”), Prime Merger Sub I, Inc., an exempted
company incorporated with limited liability in the Cayman Islands and a direct, wholly-owned subsidiary of PubCo (“First Merger
Sub”), Prime Merger Sub II, Inc., a Delaware corporation and wholly-owned subsidiary of PubCo (“Second Merger Sub”),
and Plus Holdings Ltd., an exempted company incorporated with limited liability in the Cayman Islands and wholly-owned subsidiary of Plus
(“Plus Holdings”).
Pursuant to the Merger Agreement, a business combination
between the Company and Plus (the “Business Combination”) will be effected through (a) the merger of Prime Merger Sub, Ltd.,
an exempted company incorporated with limited liability in the Cayman Islands and wholly-owned subsidiary of Plus Holdings, with and into
Plus, with Plus surviving as a wholly-owned subsidiary of Plus Holdings (the “F-Reorg Merger”); (b) following the F-Reorg
Merger, the merger of First Merger Sub with and into Plus Holdings, with Plus Holdings surviving as a wholly-owned subsidiary of PubCo
(the “Plus Merger”); and (c) simultaneously with, and as part of the same overall transaction as the Plus Merger, the merger
of Second Merger Sub with and into the Company, with the Company surviving as a wholly-owned subsidiary of PubCo (the “HCIC Merger”
and, together with the Plus Merger, the “Mergers”). As a result of the Mergers, Plus Holdings and the Company each will become
a direct wholly-owned subsidiary of PubCo, Plus will become a direct wholly-owned subsidiary of Plus Holdings and PubCo will become a
publicly traded company.
Plus is a global provider of self-driving truck
technology aimed at making trucks safer, more efficient, more comfortable, and better for the environment using its autonomous driving
solution PlusDrive advanced sensing technologies, including radar, lidar, and cameras to provide a 360-degree sensing system. Plus plans
to begin mass production of PlusDrive, starting in 2021 with FAW, a heavy-truck manufacturer. Plus is headquartered in Cupertino, California.
Under the terms of the Merger Agreement, the aggregate
consideration to be paid to existing Plus shareholders as a result of the F-Reorg Merger and Plus Merger is expected to be up to approximately
272 million shares of newly issued ordinary shares of PubCo, par value of $0.000002, designated as Class A Ordinary Shares, which are
expected to have one (1) vote per share (“PubCo Class A Ordinary Shares”) and ordinary shares of PubCo, par value of $0.000002,
designated as Class B Ordinary Shares, which are expected to have eight (8) votes per share (“PubCo Class B Ordinary Shares”
and together with the PubCo Class A Ordinary Shares, “PubCo Shares”), with such PubCo Shares valued at $10 per share. A portion
of the aggregate consideration of PubCo Shares will be subject to forfeiture restrictions or other restrictions or in the form of options
or warrants of PubCo, in each case to the same extent to which the securities of existing Plus securityholders are subject to forfeiture
restrictions or other restrictions or held in the form of options or warrants.
As a result of the HCIC Merger, (a) each outstanding
share of the Company’s common stock will be cancelled in exchange for the right to receive for one PubCo Class A Ordinary Share,
and (b) each outstanding warrant of the Company will become exercisable for one PubCo Class A Ordinary Share on the same terms and conditions.
In connection with the execution of the Merger
Agreement, on May 7, 2021, the Company and PubCo entered into separate subscription agreements (the “PIPE Subscription Agreements”)
with a number of investors (the “PIPE Investors”), pursuant to which the PIPE Investors have agreed to subscribe for and purchase,
and PubCo has agreed to issue and sell to the PIPE Investors, an aggregate of 15 million PubCo Class A Ordinary Shares (the “PIPE
Shares”), for a purchase price of $10.00 per share and at an aggregate purchase price of $150 million in a private placement (the
“PIPE Financing”).
The consummation of the Business Combination
(the “Closing”) is subject to certain conditions, including but not limited to the approval of the Company’s
stockholders and Plus’ shareholders of the Merger Agreement. The Merger Agreement may also be terminated by either party under
certain circumstances, including upon notice after November 8, 2021. The parties have agreed to customary exclusivity obligations by
either party for any reason. The Closing is expected to occur as promptly as practicable, but in no event later than three business
days following the satisfaction or waiver of all of the closing conditions contained in the Merger Agreement. The Company
anticipates the Closing will occur in the second half of 2021 but can provide no assurances that the Closing will occur timely or at
all.
Additional information regarding the proposed
Business Combination and the business and operations of Plus is contained in the Current Report on Form 8-K filed by the Company on May
10, 2021 and will be available in the Registration Statement on Form F-4 once publicly filed by PubCo with the Securities and Exchange
Commission.
Results of Operations
For the period from October 6, 2020 (date of inception)
to June 30, 2021, our activities consisted of formation and preparation for the Public Offering and, subsequent to completion of the Public
Offering on January 20, 2021, identifying and completing a suitable Initial Business Combination. As such, in 2021 we had no operations
or significant operating expenses until after the completion of the Public Offering in January 2021.
Our normal operating costs since January 20, 2021
include costs associated with our search for an Initial Business Combination (see below), costs associated with our governance and public
reporting (see below), state franchise taxes of approximately $17,000 per month (see below), a charge of $15,000 per month from our Sponsor
for administrative services and $29,000 per month ($14,000 of which is deferred as to payment until closing of our Initial
Business Combination) for compensation to each of our Chief Operating Officer and Chief Financial Officer. Our costs in the three and
six months ended June 30, 2021 also include professional and consulting fees and travel associated with evaluating various Initial Business
Combination candidates, as well as the costs of our public reporting and other costs, subsequent to the Public Offering. Professional
and consulting fees, regulatory and travel costs associated with investigating potential Initial Business Combination candidates were
approximately $5,070,000 and $6,332.000, respectively, for the three and six months ended June 30, 2021. As we identified our Initial
Business Combination candidate, our costs have increased significantly in connection with negotiating and executing a definitive agreement
and related agreements as well as additional professional, due diligence and consulting fees and travel costs required in connection with
an Initial Business Combination. Costs associated with our governance and public reporting have increased since the Public Offering and
were approximately $141,000 and $234,000 for the three and six months ended June 30, 2021. In addition, since our operating costs are
not expected to be deductible for federal income tax purposes, we are subject to federal income taxes on the interest income earned from
the Trust Account less taxes. Such federal income taxes were $-0-, for both the three and six months ended June 30, 2021 because the cost
of deductible franchise taxes exceeded the interest income earned on the Trust Account. We are permitted to withdraw interest earned from
the Trust Account for the payment of taxes to the extent of interest income earned. We did not withdraw any interest from the Trust Account
in the three and six months ended June 30, 2021.
The Public Offering and the Private Placement
closed on January 20, 2021 as more fully described in “Liquidity and Capital Resources” below. At that time, the proceeds
in the Trust Account were initially invested in a money market fund that invested solely in direct U.S. government obligations meeting
the applicable conditions of Rule 2a-7 of the Investment Company Act of 1940. At June 30, 2021, proceeds in the Trust Account continue
to be invested in such money market fund. As a result of market conditions occurring in connection with the Covid-19 pandemic, interest
rates on available investments are low (less than 0.1%) and at that level are insufficient to cover our franchise tax obligations. It
is unclear how long this condition will persist, or whether it could worsen.
As discussed further in
Note 7 to the condensed financial statements, the Company accounts for its outstanding public and private warrants as components as
derivative liabilities in the accompanying unaudited condensed financial statements. As a result, the Company is required to
measure the fair value of the public and private warrants at the end of each reporting period and recognize changes in the fair
value from the prior period in the Company’s operating results for each current period. The condensed statement of operations
for the three and six months ended June 30, 2021 reflects other expense from change in fair value of the warrant liability of
approximately $8,090,000 and $7,467,000, respectively, and charges to other expense aggregating approximately $-0- and $1,471,000,
respectively, for warrant liability transaction costs (approximately $639,000) and transaction date expense related to the issuance
of the private placement warrants (approximately $832,000).
The Company’s prior accounting for the warrants
as components of equity instead of as derivative liabilities at January 20, 2021 has been corrected to reflect the warrants as liabilities
at that date, which did not have any effect on the Company’s previously reported operating expenses, cash flows, cash, trust account
or total stockholders’ equity (see Note 7 to condensed financial statements).
Liquidity and Capital Resources
On January 20, 2021, we consummated the Public
Offering of an aggregate of 34,500,000 Units at a price of $10.00 per unit generating gross proceeds of approximately $345,000,000 before
underwriting discounts and expenses. Simultaneously with the consummation of the Public Offering, we consummated the Private Placement
of 6,933,333 Private Placement Warrants, each exercisable to purchase one share of our Class A common stock at $11.50 per share, to the
Sponsor and certain funds and accounts managed by subsidiaries of BlackRock, Inc. and D.E. Shaw Valance Portfolios,L.L.C. (collectively,
the “Direct Anchor Investors”), at a price of $1.50 per Private Placement Warrant, generating gross proceeds, before expenses,
of approximately $10,400,000.
The net proceeds from the Public Offering and
Private Placement were approximately $347,776,000, net of the non-deferred portion of the underwriting commissions of $6,900,000 and offering
costs and other expenses of approximately $724,000. $345,000,000 of the proceeds of the Public Offering and the Private Placement have
been deposited in the Trust Account and are not available to us for operations (except amounts to pay taxes). At June 30, 2021, we had
approximately $1,366,000 of cash available outside of the Trust Account to fund our activities until we consummate an Initial Business
Combination.
Until the consummation of the Public Offering,
the Company’s only sources of liquidity were an initial purchase of shares of our Class B common stock for $25,000 by the Sponsor,
and a total of $150,000 loaned by the Sponsor against the issuance of an unsecured promissory note (the “Note”). The Note
was non-interest bearing and was paid in full on January 20, 2021 in connection with the closing of the Public Offering.
At June 30, 2021, the Company has approximately $1,366,000 in cash,
approximately $6,270,000 of current liabilities and approximately $4,418,000 in negative working capital. The Company has incurred and
expects to continue to incur significant costs in pursuit of its Business Combination. These conditions raise substantial doubt about
the Company's ability to continue as a going concern for a period of time within one year after the date that the financial statements
are issued. There is no assurance that the Company's plans to consummate a Business Combination will be successful or successful within
the Combination Period. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The preponderance of the current liabilities (approximately $5,810,000)
results from amounts accrued as payable to professional service firms who indicated their intention to accept deferred payment terms,
or success fees, that are payable at the closing of the proposed Business Combination. As a result, the Company believes, but cannot assure,
that it has the liquidity to complete a Business Combination.
The Company has only until January 20, 2023 to
complete an Initial Business Combination. If the Company does not complete an Initial Business Combination by January 20, 2023, the Company
will (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible, but not more than ten business
days thereafter, redeem the public shares of Class A common stock for a pro rata portion of the Trust Account, including interest, but
less taxes payable (and less up to $100,000 of such net interest to pay dissolution expenses) and (iii) as promptly as reasonably possible
following such redemption, dissolve and liquidate the balance of the Company’s net assets to its creditors and remaining stockholders,
as part of its plan of dissolution and liquidation. The initial stockholders have waived their redemption rights with respect to their
founder shares; however, if the initial stockholders or any of the Company’s officers, directors or their affiliates acquire shares
of Class A common stock in or after the Public Offering, they will be entitled to a pro rata share of the Trust Account upon the Company’s
redemption or liquidation in the event the Company does not complete an Initial Business Combination within the required time period.
In the event of such liquidation,
it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will
be less than the price per unit in the Public Offering.
Off-balance sheet financing arrangements
As of June 30, 2021, we have no obligations, assets or liabilities
which would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated
entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose
of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet
financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or entered into
any agreements for non-financial assets.
Contractual obligations
At June 30, 2021, we did not have any long-term
debt, capital lease obligations, operating lease obligations or long-term liabilities. In connection with the Public Offering, we entered
into an Administrative Support Agreement with Hennessy Capital Group LLC, an affiliate of our Sponsor, pursuant to which the Company pays
Hennessy Capital Group LLC $15,000 per month for office space, utilities and secretarial and administrative support.
Also, commencing on the date the securities are
first listed on the Nasdaq Capital Market, the Company has agreed to compensate each of its President and Chief Operating Officer as well
as its Chief Financial Officer $29,000 per month prior to the consummation of the Company’s initial Business Combination,
of which $14,000 per month is payable upon the completion of the Company’s initial Business Combination and $15,000
per month is payable currently for their services. During the three and six months ended June 30, 2021, approximately $90,000 and $166,000
was paid and approximately $193,000 was included in current liabilities as deferred compensation at June 30, 2021 for these obligations.
Upon completion of the Initial Business Combination
or the Company’s liquidation, the Company will cease paying or accruing these monthly fees.
In connection with identifying an Initial Business
Combination candidate and negotiating an Initial Business Combination, the Company may enter into engagement letters or agreements with
various consultants, advisors, professionals and others in connection with an Initial Business Combination. The services under these engagement
letters and agreements can be material in amount and in some instances can include contingent or success fees. Contingent or success fees
(but not deferred underwriting compensation) would be charged to operations in the quarter that an Initial Business Combination is consummated.
In most instances (except with respect to our independent registered public accounting firm), these engagement letters and agreements
are expected to specifically provide that such counterparties waive their rights to seek repayment from the funds in the Trust Account.
Critical Accounting Policies
The preparation of financial statements and related
disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the
periods reported. Actual results could materially differ from those estimates. The Company has identified the following as its critical
accounting policies:
Emerging Growth Company:
Section 102(b)(1) of the JOBS Act exempts emerging
growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those
that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the
Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can
elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any
such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that
when an accounting standard is issued or revised and it has different application dates for public or private companies, the Company,
as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company
nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential
differences in accounting standards used.
Net Income (Loss) Per Common Share:
Net
loss per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares
outstanding during the period as calculated using the treasury stock method. The Company has not considered the effect of the warrants
sold in the Public Offering and the Private Placement to purchase an aggregate of 15,558,333 shares of Class A common stock in the calculation
of diluted income (loss) per share, since their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted
income (loss) per common share is the same as basic loss per common share for the period.
The Company’s condensed statement of operations
include a presentation of income (loss) per share for common stock subject to redemption in a manner similar to the two-class method of
income (loss) per share. Net income (loss) per share, basic and diluted for Class A common stock is calculated by dividing the interest
income earned on the funds in the Trust Account, net of income tax expense and franchise tax expense, by the weighted average number of
shares of Class A common stock outstanding since their original issuance. Net income (loss) per common share, basic and diluted, for shares
of Class B common stock is calculated by dividing the net income (loss), less income attributable to Class A common stock, by the weighted
average number of shares of Class B common stock outstanding for the period. Net income (loss) available to each class of common stockholders
is as follows for the three and six months ended June 30, 2021:
|
|
Three Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
2021
|
|
|
June 30,
2021
|
|
|
|
|
|
|
|
|
Net income available to Class A common stockholders:
|
|
|
|
|
|
|
Interest income
|
|
$
|
12,000
|
|
|
$
|
28,000
|
|
Less: Income and franchise taxes (limited to income)
|
|
|
(12,000
|
)
|
|
|
(28,000
|
)
|
Net income attributable to Class A common stockholders
|
|
$
|
-
|
|
|
$
|
-
|
|
Weighted average Class A common shares outstanding - basic and diluted
|
|
|
34,500,000
|
|
|
|
34,500,000
|
|
Net income per Class A common share – basic and diluted
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
Net loss available to Class B common stockholders:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(13,701,000
|
)
|
|
$
|
(16,136,000
|
)
|
Less: amount attributable to Class A common stockholders
|
|
|
-
|
|
|
|
-
|
|
Net (loss) attributable to Class B common stockholders
|
|
$
|
(13,701,000
|
)
|
|
$
|
16,136,000
|
|
Weighted average Class B common shares outstanding – basic and
diluted
|
|
|
8,625,000
|
|
|
|
8,506,000
|
|
Net loss per Class B common share – basic and diluted
|
|
$
|
(1.59
|
)
|
|
$
|
(1.90
|
)
|
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 Deposit
Insurance Corporation maximum coverage of $250,000. The Company has not experienced losses on these accounts and management believes the
Company is not exposed to significant risks on such accounts.
Financial Instruments:
The fair value of the Company’s assets and
liabilities, which qualify as financial instruments under Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented
in the balance sheet primarily due to their short-term nature.
Use of Estimates:
The preparation of condensed financial statements in conformity
with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts
of expenses during the reporting period.
Making estimates requires management to exercise
significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances
that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near
term due to one or more future confirming events. One of the more significant estimates included in these financial statements is the
determination of the fair value of the warrant liability. Such estimates may be subject to change as more current information becomes
available and accordingly the actual results could differ significantly from those estimates.
Deferred Offering Costs:
The
Company complies with the requirements of the FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A —
“Expenses of Offering.” Costs incurred in connection with preparation for the Public Offering were approximately
$19,689,000, including the underwriters discount of $18,975,000. Such costs were allocated among the equity and warrant
liability components based on their fair values and approximately
$19,050,000 of such costs have been charged to equity and the remainder, approximately $639,000, have been charged to the condensed
statement of operations upon completion of the Public Offering in January 2021.
Income Taxes:
The Company follows the asset and liability method
of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for
the estimated future tax consequences attributable to differences between the financial statements 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.
The Company’s currently taxable income consists
of interest income on the Trust Account net of taxes. The Company’s general and administrative costs are generally considered start-up
costs and are not currently deductible. During the three and six months ended June 30, 2021, the Company recorded income tax expense of
approximately $-0- in both periods because the cost of deductible franchise taxes exceeded the interest income earned on the Trust Account.
The Company’s effective tax rate for the three and six months ended June 30, 2021 was approximately -0-% in both periods which differs
from the expected income tax rate due to the start-up costs (discussed above) which are not currently deductible. At June 30, 2021 and
December 31, 2020, the Company has a deferred tax asset of approximately $190,000 and $-0-, respectively, primarily related to start-up
costs. Management has determined that a full valuation allowance of the deferred tax asset is appropriate at this time.
FASB ASC 740 prescribes a recognition threshold
and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in
a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing
authorities. There were no unrecognized tax benefits as of June 30, 2021 or 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
at June 30, 2021 or 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.
Redeemable Common Stock:
As discussed in Note 4, all of the 34,500,000 public
shares sold as part of Units in the Public Offering contain a redemption feature which allows for the redemption of public shares if the
Company holds a stockholder vote or there is a tender offer for shares in connection with a Business Combination. In accordance with FASB
ASC 480, redemption provisions not solely within the control of the Company require the security to be classified outside of permanent
equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are
excluded from the provisions of FASB ASC 480. Although the Company did not specify a maximum redemption threshold, its charter provides
that in no event will it redeem its public shares in an amount that would cause its net tangible assets (stockholders’ equity) to
be less than $5,000,001 upon the closing of a Business Combination.
The Company recognizes changes in redemption
value immediately as they occur and adjusts the carrying value of the securities at the end of each reporting period. Increases or
decreases in the carrying amount of redeemable common stock are affected by adjustments to additional paid-in capital. Accordingly,
at June 30, 2021, 29,086,291 of the 34,500,000 public shares were classified outside of permanent equity. At December 31, 2020,
there were no shares of Class A common stock outstanding or redeemable.
Warrant Liability
The Company accounts
for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms
and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives
and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant
to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification
under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares, among other conditions for equity
classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as
of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified
warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional
paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification,
the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter.
Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. Costs associated
with issuing the warrants accounted for as liabilities are charged to operations when the warrants are issued. The fair value of the warrants
was estimated using a Monte Carlo simulation approach.
Recent Accounting Pronouncements:
Management does not believe that any recently issued,
but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial
statements.