NOTES TO CONDENSED
FINANCIAL STATEMENTS
September
30, 2022
(UNAUDITED)
Note 1 – Description of Organization and Business
Operations
LF Capital Acquisition Corp.
II (the “Company”) was incorporated in Delaware on February 19, 2021. The Company is a blank check company formed for
the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other
similar business combination with one or more businesses or entities (the “Business Combination”). The Company has
selected December 31 as its fiscal year end.
The Company is not limited
to a particular industry or geographic region for purposes of consummating a Business Combination. The Company is an early stage
and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth
companies.
As of September 30, 2022,
the Company had not commenced any operations. All activity from February 19, 2021 (inception) through September 30, 2022, relates
to the Company’s formation and Initial Public Offering (“IPO”), which is described below and, since the IPO,
the search for a prospective Business Combination. The Company will not generate any operating revenues until after the completion
of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income
earned on investments from the proceeds derived from the IPO. The registration statement for the Company’s IPO was declared
effective on November 16, 2021. On November 19, 2021, the Company consummated the IPO and sold 22,500,000 units (“Units”)
with each Unit consisting of one share of Class A Common Stock and one-half of one redeemable warrant to purchase one share of
Class A Common Stock at $11.50 per share (each, a “Public Warrant”) at $10.00 per Unit, generating gross
proceeds of $225,000,000, which is discussed in Note 3.
Simultaneously with the
closing of the IPO, the Company consummated the sale of warrants at a price of $1.00 per warrant in a
private placement (“Private Placement Warrants”) to the Company’s sponsor, Level Field Capital II, LLC (the “Sponsor”),
the underwriter of the IPO and certain funds and accounts managed by subsidiaries of a strategic investor (the “anchor investor”),
generating gross proceeds of $11,000,000 which is described in Note 4.
Simultaneously with the
closing of the IPO, the Company consummated the closing of the sale of 3,375,000 additional Units upon receiving notice
of the underwriter’s election to fully exercise its overallotment option (“Overallotment Units”), generating
additional gross proceeds of $33,750,000. Simultaneously with the exercise of the overallotment, the Company consummated the Private
Placement of an additional Private Placement Warrants to the Sponsor and the underwriter, generating gross
proceeds of $1,350,000.
Offering costs for the IPO
and the exercise of the underwriter’s over-allotment option amounted to $15,030,508, consisting of $14,231,250 of underwriting
fees, of which $9,056,250 is deferred and held in the Trust Account (defined below) and $799,258 of other offering costs.
As described in Note 5, the $9,056,250 of deferred underwriting fees payable is contingent upon the consummation of a Business
Combination within 15 months from the closing of IPO (or, following the extension of the period of time to complete the initial
business combination up to six times by an additional period of one month each time for a total of up to 21 months), subject to
the terms of the underwriting agreement.
Following the closing of
the IPO and the exercise of the underwriter’s over-allotment option, $263,925,000 ($10.20 per Unit) from the net
proceeds from the sale of the Units in the IPO and the Private Placement Warrants were placed in a trust account (“Trust
Account”) and have been invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment
Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended
investment company that holds itself out as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2),
(d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion
of a Business Combination and (ii) the distribution of the Trust Account, as described below.
The Company’s management
has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of the Private Placement
Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.
There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete
one or more initial Business Combinations having an aggregate fair market value of at least 80% of the assets held in the
Trust Account (excluding the deferred underwriting fees and taxes payable on income earned on the Trust Account) at the time of
the agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination if
the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise
acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the
Investment Company Act. There is no assurance the Company will be able to successfully effect a Business Combination.
The Company will provide
the holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion
of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called
to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder
approval of a Business Combination or conduct a tender offer will be made by the Company. The Public Stockholders will be entitled
to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.20
per Public Share, plus any pro rata interest then in the Trust Account, net of taxes payable). The warrants will subject to redemption,
as further described in Note 6.
All of the Public Shares
contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation,
if there is a stockholder vote or tender offer in connection with the Company’s Business Combination and in connection with
certain amendments to the Company’s amended and restated certificate of incorporation (the “Certificate of Incorporation”).
In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codifications (“ASC”)
480, “Distinguishing Liabilities from Equity” (“ASC 480”) Subtopic 10-S99, redemption provisions not solely
within the control of a company require common stock subject to redemption to be classified outside of permanent equity. Given
that the Public Shares were issued with other freestanding instruments (i.e., Public Warrants), the initial carrying value of Class
A Common Stock classified as temporary equity was the allocated proceeds determined in accordance with ASC 470-20 “Debt with
Conversion and other Options”. The Class A Common Stock is subject to ASC 480-10-S99. If it is probable that the equity instrument
will become redeemable, the Company has the option to either (i) accrete changes in the redemption value over the period from the
date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest
redemption date of the instrument or (ii) recognize changes in the redemption value immediately as they occur and adjust the carrying
amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize
the changes immediately. Although redemptions cannot cause the Company’s net tangible assets to fall below $5,000,001, the
Public Shares are redeemable and are classified as such on the balance sheet until the date on which such a redemption event takes
place.
Redemptions of the Company’s
Public Shares may be subject to the satisfaction of conditions, including minimum cash conditions, pursuant to an agreement relating
to the Company’s Business Combination. If the Company seeks stockholder approval of the Business Combination, the Company
will proceed with a Business Combination if a majority of the shares voted are voted in favor of the Business Combination, or such
other vote as required by law or stock exchange rule. If a stockholder vote is not required by applicable law or stock exchange
listing requirements and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will,
pursuant to the Certificate of Incorporation, conduct the redemptions pursuant to the tender offer rules of the SEC and file tender
offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is
required by applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business
or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules
and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination,
the Sponsor has agreed to vote its Founder Shares (as defined in Note 4) and any Public Shares purchased during or after the IPO
in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares without
voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.
Notwithstanding the foregoing,
the Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other
person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to
more than an aggregate of 15% or more of the Class A Common Stock sold in the Initial Public Offering, without the prior consent
of the Company.
The Company’s Sponsor,
officers and directors (collectively, the “Initial Stockholders”) have agreed not to propose an amendment to the Certificate
of Incorporation that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares
if the Company does not complete a Business Combination, unless the Company provides the Public Stockholders with the opportunity
to redeem their shares of Class A Common Stock in conjunction with any such amendment.
If the Company is unable
to complete a Business Combination within 15 months from the closing of the IPO (unless extended in connection with an Extension
Election as described below or as a result of an amendment to our amended and restated certificate of incorporation, which would
require the approval of the holders of at least 65% of all of the Company’s then outstanding common stock) (“Combination
Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably
possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal
to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and
not previously released to the Company to pay the Company’s franchise and income taxes (less up to $100,000 of interest
to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish
Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject
to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s
remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s
obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. However, if the
Company anticipates that it may be unable to complete an initial business combination within 15 months, it may, but is not obligated
to, extend the period of time to complete a business combination up to six times by an additional period of one month each time
(for a total of up to 21 months) (each such one-month extension of the prescribed time period, an “Extension Election”).
The Initial Stockholders
have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination
within the Combination Period. However, if the Initial Stockholders should acquire Public Shares in or after the Initial Public
Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company
fails to complete a Business Combination within the Combination Period. The underwriter has agreed to waive its rights to its deferred
underwriting fees (see Note 5) held in the Trust Account in the event the Company does not complete a Business Combination within
the Combination Period, and, in such event, such amounts will be included with the other funds held in the Trust Account that will
be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share
value of the residual assets remaining available for distribution (including Trust Account assets) will be only $10.20 per share
held in the Trust Account. In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the
Company if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target
business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account.
This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or
claim of any kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriter
against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”).
Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible
to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will
have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except the
Company’s independent registered public accounting firm), prospective target businesses or other entities with which the
Company does business, execute agreements waiving any right, title, interest or claim of any kind in or to monies held in the Trust
Account.
Risks
and Uncertainties
In
March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic
which continues to spread throughout the United States and the world. As of the date the financial statements were issued, there
is considerable uncertainty around the expected duration of this pandemic. Management continues to evaluate the impact of the COVID-19
pandemic, and the Company has concluded that, while it is reasonably possible that COVID-19 could have a negative effect on the
Company’s ability to identify a target company for a Business Combination, the specific impact is not readily determinable
as of the date of the unaudited condensed financial statements. The unaudited condensed financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
In
February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this
action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus.
Further, the impact of this action and related sanctions on the world economy are not determinable as of the date of these financial
statements and the specific impact on the Company’s financial condition, results of operations, and cash flows is also not
determinable as of the date of these financial statements.
Inflation Reduction Act of
2022
On August 16,
2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among
other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and
certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax
is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise
tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of
calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances
against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise
tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other
guidance to carry out and prevent the abuse or avoidance of the excise tax.
Any redemption
or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise,
may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with
a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of
the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business
Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination
(or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination)
and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable
by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined.
The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s
ability to complete a Business Combination.
At this time,
it has been determined that none of the IR Act tax provisions have an impact to the Company’s fiscal 2022 tax provision.
The Company will continue to monitor for updates to the Company’s business along with guidance issued with respect to the
IR Act to determine whether any adjustments are needed to the Company’s tax provision in future periods.
Liquidity
and Going Concern
As of September 30, 2022,
the Company had $307,984 in its operating bank account, $265,218,910 in securities held in the Trust Account to be used for
a Business Combination or to repurchase or redeem its common stock in connection therewith and working capital of $315,917.
In connection with the Company’s
assessment of going concern considerations in accordance with the authoritative guidance in FASB Accounting Standards Update (“ASU”)
Subtopic 205-40, “Presentation of Financial Statements-Going Concern,” management has determined that should the Company
be unable to complete a Business Combination, the mandatory liquidation and subsequent dissolution described in Note 1 of the financial
statements that would follow, raises substantial doubt about the Company’s ability to continue as a going concern. The Company
has 15 months from the closing of the IPO (i.e., February 19, 2023) to consummate a Business Combination. It is uncertain that
the Company will be able to consummate a Business Combination by the specified period. If a Business Combination is not consummated
by February 19, 2023, there will be a mandatory liquidation and subsequent dissolution.
Also, in connection with
the Company’s assessment of going concern considerations in accordance with the authoritative guidance in FASB Accounting
Standards Update (“ASU”) Subtopic 205-40, “Presentation of Financial Statements-Going Concern,” management
has determined that if the Company is unable to raise additional funds to alleviate liquidity needs as well as complete a Business
Combination by February 19, 2023 then the Company will cease all operations except for the purpose of liquidating. The liquidity
condition as well as the date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s
ability to continue as a going concern.
These financial statements
do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might
be necessary should the Company be unable to continue as a going concern.
Note 2 — Summary of Significant
Accounting Policies
Basis of Presentation
The accompanying unaudited
condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the
United States of America (“U.S. GAAP”) for financial information and pursuant to the rules and regulations of the SEC.
Accordingly, they do not include all of the information and footnotes required by U.S. GAAP. In the opinion of management, the
unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for
the fair statement of the balances and results for the periods presented. Operating results for the three months ended September
30, 2022 are not necessarily indicative of the results that may be expected through December 31, 2022.
The accompanying unaudited
condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in
the Annual Report on Form 10-K and the final prospectus filed by the Company with the SEC on March 25, 2022 and November 17, 2021,
respectively.
Emerging Growth Company
The Company is an emerging
growth company as defined in Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”),
which exempts emerging growth companies from being required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a
class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.
The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the
requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected
not to opt out of such extended transition period, which means that when a standard is issued or revised, and it has different
application dates for public or private companies, the Company, as an emerging growth company, will adopt the new or revised standard
at the time private companies adopt the new or revised standard.
This may make comparison
of the Company’s unaudited condensed financial statement with those of another public company that is neither an emerging
growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible
because of the potential differences in accounting standards used.
Use
of Estimates
The preparation of financial
statements in conformity with 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 unaudited
condensed financial statements. Significant estimates in these unaudited condensed financial statements include those related to
the fair value of Warrants. Making estimates requires management to exercise significant judgment. Such estimates may be subject
to change as more current information becomes available and accordingly the actual results could differ
significantly from those estimates. It is at least reasonably possible that the estimate
of the effects 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. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all
short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not
have any cash equivalents as of September 30, 2022.
Investments Held in Trust Account
At September 30, 2022, substantially
all of the assets held in the Trust Account were held in U.S. Treasury securities. The Company’s investments held in the
Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the
end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are
included in unrealized gains on marketable securities held in Trust Account in the accompanying unaudited condensed statement of
operations. The estimated fair values of investments held in Trust Account are determined using available market information.
Convertible Promissory Note
The Company accounts
for its convertible promissory note under ASC 815, “Derivatives and Hedging” (“ASC 815”). Under 815-15-25,
the election can be at the inception of a financial instrument to account for the instrument under the fair value option under
ASC 825, “Financial Instruments” (“ASC 825”). The Company has made such election for its convertible promissory
note. Using fair value option, the convertible promissory note is required to be recorded at its initial fair value on the date
of issuance and each balance sheet date thereafter. Differences between the
face value of the note and fair value at issuance are recognized as either an expense in the condensed statements of operations
(if issued at a premium) or as a capital contribution (if issued at a discount). Changes in the estimated fair value of the notes
are recognized as non-cash gains or losses in the condensed statements of operations.
Offering Costs Associated with the Initial
Public Offering
Offering costs
amounted to $15,030,508, of which $14,621,728 and $408,779 were charged against the carrying value of Class A Common
Stock and public and private warrants, respectively, as of November 19, 2021, based on the relative value of the common shares
and public and private Warrants.
Concentration of Credit Risk
Financial instruments
that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which,
at times, may exceed the Federal Depository Insurance Corporation limit of $250,000. At September 30, 2022 and December 31, 2021,
the Company has not experienced losses on these accounts, and management believes the Company is not exposed to significant risks
on such account.
Fair Value of Financial Instruments
The fair value of the Company’s
assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,”
equals or approximates the carrying amounts represented in the accompanying unaudited condensed balance sheet, primarily due to
their short-term nature.
Income Taxes
The Company accounts for
income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets
and liabilities for both the expected impact of differences between the unaudited condensed financial statements and tax basis
of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC
740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred
tax assets will not be realized. As of September 30, 2022 and December 31, 2021, the Company’s deferred tax asset had a full
valuation allowance recorded against it.
The Company’s effective
tax rate was 26.65% and 0.00% for the three months ended September 30, 2022 and 2021, respectively, and 51.24% and 0.00% for the
nine months ended September 30, 2022 and for the period from February 19, 2021 (inception) through September 30, 2021, respectively.
The effective tax rate differs from the statutory tax rate of 21% for the three and nine months ended September 30, 2022 and for
the three months and for the period from February 19, 2021 (inception) through September 30, 2021, due to fair value changes on
warrant liabilities and the change in valuation allowance on the deferred tax assets.
ASC 740 also clarifies the
accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition
threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination
by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim
period, disclosure and transition.
The
Company has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation
by major taxing authorities since inception. The company has not recorded any unrecognized tax benefits since inception. The Company’s
management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Class A Common Stock Subject to Possible
Redemption
The Company follows the
two-class method to calculate earnings per ordinary share. The Company accounts for its Class A Common Stock subject to possible
redemption in accordance with the guidance in ASC 480. Conditionally redeemable Class A Common Stock (including Class A Common
Stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence
of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, Class
A Common Stock is classified as stockholders’ equity. The Company’s Class A Common Stock sold in the IPO and in connection
with the exercise of the underwriter’s over-allotment option feature certain redemption rights that are considered to be
outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, on September 30, 2022, 25,875,000 shares
of Class A Common Stock subject to possible redemption is presented as temporary equity.
Immediately upon the closing
of the IPO and the exercise of the underwriter’s over-allotment option, the Company recognized the accretion from the initial
book value to redemption amount value. The change in the carrying value of redeemable shares of Class A Common Stock resulted in
charges against additional paid-in capital and accumulated deficit.
As of September 30, 2022,
and December 31, 2021 the shares of Class A Common Stock reflected on the unaudited condensed balance sheet are reconciled on the
following table:
Schedule of reconciled balance sheet |
|
|
|
|
Gross proceeds |
|
$ |
258,750,000 |
|
Less |
|
|
|
|
Fair value of Public Warrants at issuance |
|
|
(6,727,500 |
) |
Class A shares issuance costs |
|
|
(14,621,728 |
) |
Plus: |
|
|
|
|
Remeasurement of carrying value to redemption value |
|
|
26,524,228 |
|
Class A Common Stock subject to possible redemption at December 31, 2021 |
|
|
263,925,000 |
|
Plus: Remeasurement of Class A ordinary shares to redemption value |
|
|
38,065 |
|
Class A Common Stock subject to possible redemption at June 30, 2022 |
|
|
263,963,065 |
|
Plus: Remeasurement of Class A ordinary shares to redemption value |
|
|
1,037,424 |
|
Class A Common Stock subject to possible redemption at September 30, 2022 |
|
$ |
265,000,489 |
|
Net income (loss) per Common Share
The Company has two classes
of shares, which are referred to as Class A Common Stock and Class B Common Stock (the “Founder Shares”). Earnings
and losses are shared pro rata between the two classes of shares. A total of 12,937,500 Public Warrants (see Note 3)
and 12,350,000 Private Placement Warrants (see Note 4) to purchase an aggregate of 25,287,500 shares of
Class A Common Stock at $11.50 per share were issued on November 19, 2021. At September 30, 2022, no Public Warrants
or Private Placement Warrants have been exercised. The 25,287,500 shares of Class A Common Stock for which the outstanding
Public Warrants and Private Placement Warrants are exercisable were excluded from diluted earnings per share for the period ended
September 30, 2022 because they are contingently exercisable, and the contingencies have not yet been met. The calculation does
not include the warrants that could be issued as a result of the conversion option in the
convertible promissory note. As a result, diluted net loss per share of common stock is the same as basic net income loss
per share of common stock for the period. The table below presents a reconciliation of the numerator and denominator used to compute
basic and diluted net loss per share for each class of stock.
Schedule of earnings per share, basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended September 30, |
|
|
2022 |
|
2021 |
|
|
|
|
|
|
Class
A |
|
Class
B |
|
|
Class
A common |
|
Class
B |
|
common |
|
Common |
|
|
stock |
|
Common
stock |
|
stock |
|
stock |
Basic
and diluted net income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation
of net income (loss) |
|
$ |
602,578 |
|
|
$ |
150,645 |
|
|
$ |
— |
|
|
$ |
(5,341 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remeasurement
for Class A Common Stock to
redemption value |
|
|
1,037,424 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net
income (loss) |
|
$ |
1,640,002 |
|
|
$ |
150,645 |
|
|
$ |
— |
|
|
$ |
(5,341 |
) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding |
|
|
25,875,000 |
|
|
|
6,468,750 |
|
|
|
|
|
|
|
5,625,000 |
|
Basic
and dilution net income (loss) per share |
|
$ |
0.06 |
|
|
$ |
0.02 |
|
|
$ |
— |
|
|
$ |
(0.00 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the period |
|
|
|
|
|
|
February
19, 2021 |
|
|
For
the nine months ended |
|
(inception)
through |
|
|
September
30, |
|
September
30, |
|
|
2022 |
|
2021 |
|
|
|
|
Class
B |
|
Class
A |
|
Class
B |
|
|
Class
A common |
|
Common |
|
common |
|
Common |
|
|
stock |
|
stock |
|
stock |
|
Stock |
Basic
and diluted net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation
of net income (loss) |
|
$ |
224,688 |
|
|
$ |
56,172 |
|
|
$ |
— |
|
|
$ |
(12,688 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remeasurement
for Class A Common Stock
to redemption value |
|
|
1,075,489 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net
income (loss) |
|
$ |
1,300,177 |
|
|
$ |
56,172 |
|
|
$ |
— |
|
|
$ |
(12,688 |
) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding |
|
|
25,875,000 |
|
|
|
6,468,750 |
|
|
|
— |
|
|
|
5,625,000 |
|
Basic
and dilution net income (loss) per share |
|
$ |
0.05 |
|
|
$ |
0.01 |
|
|
$ |
— |
|
|
$ |
(0.00 |
) |
Warrant Instruments
The Company accounts for
warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific
terms and applicable authoritative guidance in ASC 480 and ASC 815. The assessment
considers whether the instruments are free standing financial instruments pursuant to ASC
480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity
classification under ASC 815, including whether the instruments are indexed to the
Company’s own common shares and whether the instrument holders could potentially
require “net cash settlement” in a circumstance outside of the Company’s
control, among other conditions for equity classification. This assessment, which requires
the use of professional judgment, was conducted at the time of warrant issuance and as of each subsequent period end date while
the instruments are outstanding. Management has concluded that the Public Warrants
and Private Placement Warrants issued pursuant to the warrant agreement qualify for
equity accounting treatment.
Stock Compensation Expense
In connection with the Company’s
IPO, founder’s shares were sold to certain independent directors by the Sponsor at the price of $ per share.
The Company accounts for
stock-based compensation expense in accordance with ASC 718, “Compensation – Stock Compensation” (“ASC
718”) under which stock-based compensation associated with equity-classified awards is measured at fair value upon the grant
date and recognized over the requisite service period. To the extent a stock-based award is subject to a performance condition,
the amount of expense recorded in a given period, if any, reflects an assessment of the probability of achieving such performance
condition, with compensation recognized once the event is deemed probable to occur. Forfeitures are recognized as incurred.
The fair value of the 80,000
founder shares sold to certain independent directors as of November 19, 2021, was $627,119, or $7.84 per share. The Company
used a Monte Carlo Model Simulation to arrive at the fair value of the stock compensation. The key assumptions in the option pricing
model utilized are assumptions related to expected separation date of Units, anticipated business combination date, purchase price,
share-price volatility, expected term, exercise date, risk-free interest rate and present value. The expected volatility as of
the IPO Closing Date was derived based upon similar SPAC warrants and technology exchange traded funds which aligns with Company’s
stated industry target and present value factor was based on risk-free rate and terms until the exercise date. The Company’s
Founder Shares sold to independent directors (see Note 4) were deemed within the scope of ASC 718 and are subject to a performance
condition, namely the occurrence of a Business Combination. Compensation expense related to the Founder Shares transferred is recognized
only when the performance condition is probable of occurrence, or more specifically when a Business Combination is consummated.
Therefore, no stock-based compensation expense has been recognized during the period from February 19, 2021 (inception) through
September 30, 2022.
Recent Accounting Pronouncements
The Company has reviewed
recent accounting pronouncements and concluded that they are either not applicable to the Company, or no material effect is expected
on the financial statement as a result of future adoption.
Note 3 — Initial
Public Offering
Pursuant to the IPO, and
including the underwriter’s exercise of its over-allotment option, the Company sold 25,875,000 Units at a price
of $10.00 per Unit resulting in gross proceeds of $258,750,000 and net proceeds of $243,738,425 after deduction
of offering costs. Each Unit consists of one Public Share and one-half of one Public Warrant. Each Public Warrant entitles the
holder to purchase one share of Class A Common Stock at a price of $11.50 per share, subject to adjustment (see Note 6).
Note 4 — Related Party Transactions
Founder Shares
On March 5, 2021, the Sponsor
acquired shares of the Company’s common stock. On March 15, 2021, the Company effectuated a recapitalization
of the Company, which included a 64,687.50-for-1 stock split, resulting in an aggregate of 6,468,750 Founder Shares outstanding.
On June 21, 2021, the Company effectuated a recapitalization of the Company, which included a 1.11-for-1 stock split, resulting
in an aggregate of 7,187,500 Founder Shares outstanding. On October 26, 2021, the Company effectuated a recapitalization
of the Company, which included a 1-for-1.11 reverse stock split, resulting in an aggregate of 6,468,750 Founder
Shares outstanding (up to 843,750 of which were subject to forfeiture if the underwriter’s over-allotment option
was not exercised in full). Since the underwriter exercised its over-allotment option in full, the Sponsor did not forfeit any
Founder Shares. The Sponsor subsequently transferred an aggregate of 80,000 Founder Shares to the members of the Company’s
board of directors for the same per-share consideration that it originally paid for such shares, resulting in the Sponsor holding Founder
Shares.
The Founder Shares will
automatically convert into shares of Class A Common Stock at the time of the Company’s initial Business Combination and are
subject to certain transfer restrictions. Holders of Founder Shares may also elect to convert their shares of Class B Common Stock
into an equal number of shares of Class A Common Stock, subject to adjustment, at any time.
The Initial Stockholders
have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur
of: (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination,
(x) if the last sale price of the Class A Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing
at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger,
capital stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to
exchange their shares of common stock for cash, securities or other property.
Private Placement
On November 19, 2021, simultaneously
with the consummation of the IPO and the underwriter’s exercise of its over-allotment option, the Company consummated the
issuance and sale of 12,350,000 Private Placement Warrants in a Private Placement at a price of $1.00 per Private
Placement Warrant, generating gross proceeds of $12,350,000. Each Private Placement Warrant is exercisable to purchase one share
of Class A Common Stock at a price of $11.50 per share. A portion of the proceeds from the Private Placement was added to
the proceeds from the IPO being held in the Trust Account. If the Company does not complete a Business Combination within the Combination
Period, the proceeds from the sale of the Private Placement Warrants will be used to fund the redemption of the Public Shares (subject
to the requirements of applicable law), and the Private Placement Warrants and all underlying securities will be worthless.
Convertible Promissory Note – Related Party
On April 13, 2022, the Sponsor
agreed to loan the Company an aggregate of up to $1,500,000 pursuant to a promissory note (the “Convertible Note”).
The Convertible Note is non-interest bearing and payable in full on February 19, 2023, unless extended. At the Company’s
discretion, the Convertible Note may be converted into warrants of the Company at a price of $1.00 per warrant. The warrants would
be identical to the Private Placement Warrants.
On April 13, 2022, June
30, 2022 and August 31, 2022, the Company drew $250,000, $200,000 and $175,000, respectively, under the Convertible Note. The fair
value of the $250,000 drawn on April 13, 2022 was estimated by the Company to be $229,333 at initial measurement. The $20,668 excess
proceeds over fair value was recognized in additional paid-in capital. The
fair value of the $200,000 drawn on June 30, 2022 was estimated to be $183,030 at initial measurement. The $16,970 excess
proceeds over fair value was recognized in additional paid-in capital. The fair value of the $175,000 drawn on August 31,
2022 was estimated to be $88,784 at initial measurement. The $86,216 excess proceeds over fair value was recognized in
additional paid-in capital. The aggregate fair value of the Convertible Note was estimated to be $299,018 at September 30,
2022.
Related Party Loans
On March 5, 2021, the Sponsor
agreed to loan the Company an aggregate of up to $ to cover expenses related to the IPO pursuant to a promissory note
(the “Note”). On June 18, 2021, the Sponsor amended the Note to increase the principal amount to $. The loan
was non-interest bearing and payable on the earlier of March 31, 2022 or the completion of the IPO. A total of $ under
the Note was borrowed from the Sponsor and repaid in full from the proceeds of the Initial Public Offering not being placed in
the Trust Account on November 19, 2021.
In addition, in order to
finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of
the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of
the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds
held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds
held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay
the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined
and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation
of a Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital
Loans may be convertible into warrants of the post Business Combination entity at a price of $1.00 per warrant. The warrants
would be identical to the Private Placement Warrants. As of September 30, 2022, there were no amounts outstanding under Working
Capital Loans.
Support Services
Effective November 16, 2021,
the Company entered into an Administrative Support Agreement with an entity affiliated with the Sponsor for office space and administrative
support services at a monthly fee of $15,000. Since the consummation of the IPO, the Company has paid, and intends to continue
paying until the earlier of the consummation of the Business Combination or the Company’s liquidation, a fee of approximately
$15,000 per month. The Company recognized $135,000 and $0 for the nine months ending September 30, 2022 and the period from
February 19, 2021 (inception) to September 30, 2021, respectively. The Company recognized $45,000 and $0 for the three months ending
September 30, 2022 and for three months ended September 30, 2021, respectively. As of September 30, 2022, no amounts were outstanding
for these services.
Note 5 — Commitments and Contingencies
Registration Rights
The holders of Founder Shares,
Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any, will be entitled to
registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A Common Stock)
pursuant to a registration rights agreement, dated November 16, 2021. These holders will be entitled to certain demand and “piggyback”
registration rights. However, the registration rights agreement provides that the Company will not permit any registration statement
filed under the Securities Act to become effective until the termination of the applicable lock-up period for the securities to
be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the
underwriter a 45-day option from the date of the final prospectus relating to the IPO to purchase up to 3,375,000 additional
Units to cover over-allotments, if any, at the IPO price less underwriting fees. On November 19, 2021, the underwriter elected
to fully exercise its over-allotment option, purchasing 3,375,000 of such additional Units.
The underwriter was paid
a cash underwriting discount of $0.20 per Unit sold in the IPO, including the Units issued in connection with the underwriter’s
exercise of its over-allotment option, or $5,175,000 in the aggregate at the closing of the IPO. In addition, the underwriter
is entitled to a deferred underwriting fee of $0.35 per unit, or $9,056,250, from the closing of the IPO and the exercise
of the underwriter’s over-allotment option. The deferred underwriting fees will become payable to the underwriter from the
amounts held in the Trust Account solely if the Company completes a Business Combination, subject to the terms of the underwriting
agreement.
Note 6 — Stockholders’
Deficit
Common stock
Class A Common Stock—The
Company is authorized to issue 100,000,000 shares of Class A Common Stock with a par value of $0.0001 per share. As of September
30, 2022 and December 31, 2021, there were no (excluding 25,875,000 shares of Class A Common Stock subject to possible redemption)
shares of Class A Common Stock issued and outstanding.
Class B Common Stock—The
Company is authorized to issue 10,000,000 shares of Class B Common Stock with a par value of $0.0001 per share. As of September
30, 2022 and December 31, 2021, there were 6,468,750 shares of Class B Common Stock issued and outstanding.
Preferred Stock—The
Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such
designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors.
For the period presented, there were no shares of preferred stock issued or outstanding.
Warrants—As
of September 30, 2022 and December 31, 2021, the Company had 12,937,500 Public Warrants and 12,350,000 Private Placement Warrants
outstanding. The Company has determined that warrants issued in connection with its IPO in November 2021 are subject to treatment
as equity. At IPO, the Company utilized a Monte Carlo simulation model to value the Warrants. Inherent in a Monte Carlo simulation
are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company
estimates the volatility of its ordinary 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 fair
value of the Public and Private Placement warrants on IPO was $0.52/warrant.
The Public Warrants will
become exercisable 30 days after the completion of a Business Combination. No warrants will be exercisable for cash unless the
Company has an effective and current registration statement covering the shares of Class A Common Stock issuable upon exercise
of the warrants and a current prospectus relating to such shares of Class A Common Stock. Notwithstanding the foregoing, if a registration
statement covering the shares of Class A Common Stock issuable upon exercise of the Public Warrants is not effective within a specified
period following the consummation of a Business Combination, warrant holders may, until such time as there is an effective registration
statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants
on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is
available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a
cashless basis. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption
or liquidation.
Redemption of warrants when the price per
share of Class A Common Stock equals or exceeds $18.00
Once the warrants become exercisable, the Company
may redeem the outstanding warrants:
|
● |
in whole and not in part; |
|
|
|
|
● |
at a price of $0.01 per warrant; |
|
|
|
|
● |
upon a minimum of 30 days’ prior written notice of redemption, which we refer to as the “30-day redemption period” and |
|
|
|
|
● |
if, and only if, the last reported sale price of our Class A Common Stock for any 20 trading days within a 30-day trading period ending on the third trading day prior to the date on which we send the notice of redemption to the warrant holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like and certain issuances of Class A Common Stock and equity-linked securities). |
The Company will not redeem
the warrants as described above unless an effective registration statement under the Securities Act covering the Class A Common
Stock issuable upon exercise of the warrants is effective and a current prospectus relating to those Class A Common Stock is available
throughout the 30-day redemption period. If and when the warrants become redeemable by us, we may exercise our redemption right
even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Redemption of warrants when the price per
Class A Common Stock equals or exceeds $10.00
Once the warrants become exercisable, the Company
may redeem the outstanding warrants:
|
● |
in whole and not in part |
|
|
|
|
● |
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 the table set forth in the warrant agreement, subject to certain exceptions; and |
|
|
|
|
● |
if, and only if, the Reference Value of the Company’s Class A Common Stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like and certain issuances of Class A Common Stock and equity-linked securities). |
The “fair market value”
of the Company’s Class A Common Stock for the above purpose means the volume weighted average price of our Class A Common
Stock during the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of warrants.
The Company will provide its warrant holders with the final fair market value no later than one business day after the 10-trading
day period described above ends. In no event will the warrants be exercisable in connection with this redemption feature for more
than 0.361 Class A Common Stock per warrant (subject to adjustment). Any redemption of the warrants for Class A Common Stock will
apply to both the Public Warrants and the Private Placement Warrants.
No fractional Class A Common
Stock will be issued upon redemption. If, upon redemption, a holder would be entitled to receive a fractional interest in a share,
the Company will round down to the nearest whole number of the number of Class A Common Stock to be issued to the holder. Please
see the section entitled “Description of Securities—Warrants—Public Stockholders’ Warrants” for additional
information.
If the Company calls the
Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants
to do so on a “cashless basis,” as described in the warrant agreement.
The Private Placement Warrants
will be identical to the Public Warrants underlying the Units being sold in the IPO, except that the Private Placement Warrants
and the shares of Class A Common Stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable
or saleable until after the completion of a Business Combination, subject to certain limited exceptions.
The exercise price and number
of shares of Class A Common Stock issuable on exercise of the warrants may be adjusted in certain circumstances including in the
event of a stock dividend, extraordinary dividend or our recapitalization, reorganization, merger or consolidation. However, the
warrants will not be adjusted for issuances of shares of Class A Common Stock at a price below their respective exercise prices.
Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a
Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants
will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s
assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
In addition, if the Company
issues additional shares of Class A Common Stock or equity-linked securities for capital raising purposes in connection with the
closing of a 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 Company’s board of directors, and in
the case of any such issuance to the initial stockholders or their affiliates, without taking into account any Founder Shares held
by them prior to such issuance), (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 a Business Combination on the date of the consummation of a Business
Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s Class A Common Stock
during the 10 trading day period starting on the trading day prior to the day on which the Company consummates a 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 greater of (i) the Market Value or (ii) the price at which the Company issues the
additional shares of Class A Common Stock or equity-linked securities.
Note 7 — Fair Value Measurements
The fair value of the Company’s
financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection
with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market
participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks
to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable
inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy
is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets
and liabilities:
Level 1: Quoted prices in active markets for
identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or
liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2: Observable inputs other than Level
1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices
for identical assets or liabilities in markets that are not active.
Level 3: Unobservable inputs based on the Company’s
assessment of the assumptions that market participants would use in pricing the asset or liability.
At
September 30, 2022 and December 31, 2021, the assets held in the Trust Account were held in U.S. treasury funds. All of the Company’s
investments held in the Trust Account are classified as trading securities.
The following table presents
information about the Company’s liabilities that are measured at fair value on a recurring basis at September 30, 2022 and
December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such
fair value.
Fair Value Measurements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted
Prices in |
|
Significant
Other |
|
Significant
Other |
September
30, 2022 |
|
|
|
Active
Markets |
|
Observable
Inputs |
|
Unobservable
Inputs |
|
|
Level |
|
(Level
1) |
|
(Level
2) |
|
(Level
3) |
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Treasury Securities |
|
|
1 |
|
|
$ |
265,218,910 |
|
|
|
— |
|
|
|
— |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
promissory note |
|
|
3 |
|
|
|
— |
|
|
|
— |
|
|
$ |
299,018 |
|
|
|
|
|
Quoted
Prices in |
|
Significant
Other |
|
Significant
Other |
December
31, 2021 |
|
|
|
Active
Markets |
|
Observable
Inputs |
|
Unobservable
Inputs |
|
|
Level |
|
(Level
1) |
|
(Level
2) |
|
(Level
3) |
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Treasury Securities |
|
|
1 |
|
|
$ |
263,937,611 |
|
|
|
— |
|
|
|
— |
|
The following
table presents the valuation inputs of the convertible promissory note as of September 30, 2022:
|
|
September
30, 2022 |
Risk-free interest rate |
|
|
3.96 |
% |
Time to Expiration (in years) |
|
|
0.38 |
|
Expected volatility |
|
|
3.3 |
% |
Exercise Price |
|
$ |
11.50 |
|
Dividend yield |
|
|
0.00 |
% |
Stock Price |
|
$ |
10.06 |
|
Probability of completing an initial Business Combination(1) |
|
|
50 |
% |
| (1) | This
probability was arrived at solely for the purpose of the Level 3 input to the convertible
promissory note valuation. |
The following table presents the
changes in the fair value of the Level 3 convertible promissory note as of September 30, 2022:
Schedule of changes in fair value |
|
|
|
|
Fair value as of March 31, 2022 |
|
$ |
— |
|
Initial measurement of draw on convertible promissory note - related party on April 13, 2022 |
|
|
229,333 |
|
Initial measurement of draw on convertible promissory note - related party on June 30, 2022 |
|
|
183,030 |
|
Change in fair value |
|
|
(544 |
) |
Fair value as of June 30, 2022 |
|
$ |
411,819 |
|
Initial measurement of draw on convertible promissory note - related party on August 31, 2022 |
|
|
88,784 |
|
Change in fair value |
|
|
(201,585 |
) |
Fair value as of September 30, 2022 |
|
$ |
299,018 |
|
Note 8 — Subsequent Events
The Company evaluated subsequent events and
transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements were
issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure
in the condensed financial statements.