Notes to Unaudited Condensed Financial Statements
1. Description of Organization and Business
Operations
Organization and General
Orion Acquisition Corp. (the “Company”)
is a blank check company incorporated on November 25, 2020 as a Delaware corporation and formed for the purpose of effecting a merger,
capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses
(the “Business Combination”). The Company is an emerging growth company and, as such, the Company is subject to all of the
risks associated with emerging growth companies.
As of September 30, 2022, the Company had not
commenced any operations. All activity for the period from November 25, 2020 (inception) through September 30, 2022 relates to the Company’s
formation, the preparation for the initial public offering (the “Initial Public Offering”) described below, and since the
closing of the Initial Public Offering, the search for a prospective initial Business Combination. The Company will not generate any operating
revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in
the form of interest income on cash and cash equivalents from the proceeds derived from the Initial Public Offering.
The Company’s sponsor is Orion Healthcare
Acquisition Partners, LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Company’s
Initial Public Offering was declared effective on March 1, 2021. On March 4, 2021, the Company consummated its Initial Public Offering
of 41,400,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public
Shares”), including 5,400,000 additional Units to cover over-allotments (the “Over-Allotment Units”), at $10.00 per
Unit, generating gross proceeds of $414.0 million, and incurring offering costs of approximately $23.6 million, of which approximately
$816,000 was for financing costs related to derivative warrant liabilities and approximately $14.5 million was for deferred underwriting
commissions (see Note 5).
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the private placement (“Private Placement”) of 7,520,000 warrants (each, a “Private
Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant
to the Sponsor, generating proceeds of approximately $11.3 million (see Note 4).
Upon the closing of the Initial Public Offering
and the Private Placement, $414.0 million ($10.00 per Unit) of the net proceeds of the sale of the Public Shares in the Initial Public
Offering and of the Private Placement Warrants in the Private Placement was placed in a trust account (“Trust Account”) located
in the United States with Continental Stock Transfer & Trust Company acting as trustee, and has been invested only in U.S. government
treasury bills with a maturity of 185 days or less or in money market funds investing solely in U.S. Treasuries and meeting certain conditions
under Rule 2a-7 under the Investment Company Act of 1940, as amended (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 Initial Public Offering and the sale of the Private Placement Warrants,
although substantially all of the net proceeds were intended to be applied generally toward consummating a Business Combination. There
is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial
Business Combinations having an aggregate fair market value of at least 80% of the net assets held in the Trust Account (net of amounts
disbursed to management for working capital purposes, if permitted, and excluding the amount of any deferred underwriting commissions)
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-business combination company owns or acquires 50% or more of the voting securities of the target or otherwise acquires a controlling
interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
The Company will provide the holders of the Public
Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion
of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means
of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender
offer will be made by the Company, solely in its discretion. The Public Stockholders will be entitled to redeem their Public Shares for
a pro rata portion of the amount then held in the Trust Account (initially anticipated to be $10.00 per Public Share). The per-share amount
to be distributed to Public Stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the
Company will pay to the underwriters (as discussed in Note 5). These Public Shares are recorded at a redemption value and classified as
temporary equity upon the completion of the Initial Public Offering in accordance with the Financial Accounting Standards Board’s
(“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
Orion Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
The Company will proceed with a Business Combination
if a majority of the shares voted are voted in favor of the Business Combination. The Company will not redeem the Public Shares in an
amount that would cause its net tangible assets to be less than $5,000,001. If a stockholder vote is not required by law and the Company
does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its amended and restated certificate
of incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender
offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing
a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder
approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the
proxy rules and not pursuant to the tender offer rules. Additionally, each Public Stockholder may elect to redeem their Public Shares
irrespective of whether they vote for or against the proposed transaction. If the Company seeks stockholder approval in connection with
a Business Combination, the Initial Stockholders (as defined below) agreed to vote their Founder Shares (as defined below in Note 4) and
any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. In addition, the Initial Stockholders
agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a
Business Combination.
The Amended and Restated Certificate of Incorporation
provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is
acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)), will be restricted from redeeming its shares in connection with an initial Business Combination with respect to more than
an aggregate of 15% or more of the Public Shares, without the prior consent of the Company.
The Sponsor and the Company’s officers and
directors (the “Initial Stockholders”) agreed not to propose an amendment to the Amended and Restated Certificate of Incorporation
to modify the substance or timing of the Company’s obligation to redeem 100% of the Public Shares if the Company does not complete
a Business Combination within the Combination Period (as defined below) or with respect to any other material provisions relating to stockholders’
rights or pre-initial Business Combination activity, unless the Company provides the Public Stockholders with the opportunity to redeem
their Public Shares in conjunction with any such amendment.
If the Company is unable to complete a Business
Combination within 24 months from the closing of the Initial Public Offering, or March 4, 2023, or such amended date as agreed to by a
stockholder vote (see Note 10) (the “Combination Period”), the Company will (i) cease all operations except for the purpose
of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the Public Shares, at a
per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the
funds held in the Trust Account and not previously released to the Company to pay its taxes (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 remaining stockholders and the board of directors,
dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors
and the requirements of other applicable law.
The Initial Stockholders agreed to waive their
rights to liquidating distributions from the Trust Account with respect to the Founder Shares if the Company fails to complete a Business
Combination within the Combination Period. However, if the Initial Stockholders acquire Public Shares in or after the Initial Public Offering,
they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete
a Business Combination within the Combination Period. The underwriters agreed to waive their rights to the deferred underwriting commission
(see Note 5) held in the Trust Account in the event the Company does not complete a Business Combination within in 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 $10.00. In order to protect the amounts held in the Trust Account, the
Sponsor agreed to be liable to the Company if and to the extent any claims by a third party (except for the Company’s independent
registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which
the Company has entered into a letter of intent, confidentiality or other similar agreement or business combination agreement (a “Target”),
reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public
Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per Public Share due to reductions
in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or Target
that executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) not will
it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). The Company will seek to reduce
the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors,
service providers (other than the Company’s independent registered public accounting firm), prospective target businesses or other
entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any
kind in or to monies held in the Trust Account.
Orion Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
Liquidity and Going Concern
As of September 30, 2022, the Company had approximately $483,000 in
its operating bank account held outside the Trust Account, approximately $681,000 of investment income held in the Trust Account to pay
for its tax obligations (less up to $100,000 of interest to pay dissolution expenses), and working capital deficit, exclusive of tax liabilities
of approximately $518,000.
The Company’s liquidity needs to date have
been satisfied through a contribution of $25,000 from the Sponsor to cover for certain expenses and offering costs in exchange for the
issuance of the Founder Shares (as defined in Note 4), the loan of approximately $136,000 from the Sponsor pursuant to the Note (as defined
in Note 4), and the proceeds from the consummation of the Private Placement not held in the Trust Account. The Company fully repaid the
Note on March 8, 2021. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an
affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, provide the Company
Working Capital Loans (as defined in Note 4). As of September 30, 2022 and December 31, 2021, there were no Working Capital Loans outstanding.
In connection with the Company’s assessment
of going concern considerations in accordance with FASB ASC Topic 205-40, “Presentation of Financial Statements - Going Concern,”
management has determined that the working capital deficit and the mandatory liquidation date and subsequent dissolution raise substantial
doubt about the Company’s ability to continue as a going concern. If the Company is unable to complete a Business Combination by
the end of the Combination Period, then the Company will cease all operations except for the purpose of liquidating. No adjustments have
been made to the carrying amounts of assets or liabilities should the Company be required to liquidate.
2. Basis of Presentation and Summary of Significant
Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial
statements of the Company have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”)
for interim financial information and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes
required by U.S. GAAP. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation
have been included. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2022 or any future period.
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 filed by the Company with the SEC on March 30, 2022.
Emerging Growth Company
The Company is an “emerging growth company,”
as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”),
and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that
are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting
firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation
in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts
emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that
is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered
under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging
growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth
companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period,
which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company,
as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company’s
unaudited condensed financial statements with 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.
Orion Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
Use of Estimates
The preparation of unaudited 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 unaudited condensed financial
statements.
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 unaudited condensed financial statements, which management considered in formulating its estimate, could
change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those
estimates.
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company has no cash equivalents held outside
the Trust Account as of September 30, 2022 and December 31, 2021.
Investments Held in Trust Account
The Company’s portfolio of investments is
comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity
of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable
fair value, or a combination thereof. When the Company’s investments held in the Trust Account are comprised of U.S. government
securities, the investments are classified as trading securities. When the Company’s investments held in the Trust Account are comprised
of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented
on the condensed balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair
value of these securities is included in interest earned on investments held in the Trust Account in the accompanying unaudited condensed
statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal
Deposit Insurance Corporation coverage limit of $250,000 and investments held in Trust Account. As of 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 accounts.
Fair Value of Financial Instruments
The carrying value of the Company’s assets
and liabilities recognized in the condensed balance sheets, which qualify as financial instruments under the FASB ASC Topic 820, “Fair
Value Measurements,” equals or approximates the fair values for such assets and liabilities either because of the short-term nature
of the instruments or because the instrument is recognized at fair value.
Fair Value Measurements
Fair value is defined as the price that would
be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement
date. U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.
Orion Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs
(Level 3 measurements). These tiers consist of:
|
● |
Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; |
|
● |
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
|
● |
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure
fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is
categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
Derivative Warrant Liabilities
The Company does not use derivative instruments
to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives,
pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative
instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting
period.
The warrants issued in connection with the Initial Public Offering
(the “Public Warrants”) and the Private Placement Warrants are recognized as derivative liabilities in accordance with ASC
815. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjust the instruments to fair value
at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in
fair value is recognized in the Company’s unaudited condensed statements of operations. The fair value of warrants issued by the
Company in connection with the Initial Public Offering and Private Placement have initially been estimated using Monte Carlo simulations
at each measurement date. The Private Placement warrants continue to be estimated using Monte Carlo simulations. The fair value of the
Public Warrants issued in connection with the Initial Public Offering have subsequently been measured based on the listed market price
of such warrants then measured utilizing the Level 2 input of the quoted listed trading price for such warrants as of September 30, 2022.
The determination of the fair value of the warrant liabilities may be subject to change as more current information becomes available
and accordingly the actual results could differ significantly. Derivative warrant liabilities are classified as non-current liabilities
as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Offering Costs Associated with the Initial
Public Offering
Offering costs consisted of legal, accounting,
underwriting fees and other costs incurred that were directly related to the Initial Public Offering. Offering costs are allocated to
the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds
received. Offering costs associated with warrant liabilities are expensed as incurred and presented as non-operating expenses in the unaudited
condensed statements of operations. Offering costs associated with the Public Shares were charged against the carrying value of the Class
A common stock subject to possible redemption upon the completion of the Initial Public Offering. The Company classifies deferred underwriting
commissions as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require
the creation of current liabilities.
Class A Common Stock Subject to Possible
Redemption
The Company accounts for its Class A common stock
subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.”
Class A common stock subject to mandatory redemption (if any) is classified as liability instruments and is measured at fair value. Conditionally
redeemable Class A common stock (including shares of Class A common stock that feature redemption rights that are either within the control
of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) 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 features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence
of uncertain future events. Accordingly, as of September 30, 2022 and December 31, 2021, 41,400,000 shares of Class A common stock subject
to possible redemption at the redemption amount were presented at redemption value as temporary equity, outside of the stockholders’
deficit section of the Company’s condensed balance sheets.
Orion Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
The Company recognizes changes in redemption value
immediately as they occur and adjusts the carrying value of the Class A common stock subject to possible redemption to equal the redemption
value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date
for the security. Effective with the closing of the Initial Public Offering, the Company recognized the accretion from initial book value
to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
Subsequently, the Company recognized changes in the redemption value as an increase in redemption value of Class A common stock subject
to redemption, as reflected on the accompanying unaudited condensed statements of changes in stockholders’ deficit.
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. Management believes that significant uncertainty
exists with respect to future realization of the deferred tax asset and has therefore established a full valuation allowance on its deferred
taxes as of September 30, 2022 and December 31, 2021.
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. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were
no unrecognized tax benefits, and no amounts were accrued for the payment of interest and penalties as of September 30, 2022 and December
31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material
deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
Net Income Per Share of Common Stock
The Company complies with accounting and disclosure
requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as
Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net income per
common share is calculated by dividing the net income by the weighted average shares of common stock outstanding for the respective period.
The calculation of diluted net income per common
stock does not consider the effect of the warrants issued in connection with the Initial Public Offering and the Private Placement to
purchase an aggregate of 17,870,000 shares of common stock in the calculation of diluted income per share, because their exercise is contingent
upon future events. Accretion associated with the redeemable Class A common stock is excluded from earnings per share as the redemption
value approximates fair value.
The following table reflects presents a reconciliation
of the numerator and denominator used to compute basic and diluted net income per share for each class of common stock:
| |
For the Three Months Ended
September 30, | |
| |
2022 | | |
2021 | |
| |
Class A | | |
Class B | | |
Class A | | |
Class B | |
Basic and diluted net income per share of common stock: | |
| | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| | |
| |
Allocation of net income - basic | |
$ | 1,682,665 | | |
$ | 420,666 | | |
$ | 3,753,930 | | |
$ | 938,482 | |
Allocation of net income - diluted | |
$ | 1,682,665 | | |
$ | 420,666 | | |
$ | 3,753,930 | | |
$ | 938,482 | |
| |
| | | |
| | | |
| | | |
| | |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Basic weighted average common shares outstanding | |
| 41,400,000 | | |
| 10,350,000 | | |
| 41,400,000 | | |
| 10,350,000 | |
Diluted weighted average common shares outstanding | |
| 41,400,000 | | |
| 10,350,000 | | |
| 41,400,000 | | |
| 10,350,000 | |
| |
| | | |
| | | |
| | | |
| | |
Basic net income per share of common stock | |
$ | 0.04 | | |
$ | 0.04 | | |
$ | 0.09 | | |
$ | 0.09 | |
Diluted net income per share of common stock | |
$ | 0.04 | | |
$ | 0.04 | | |
$ | 0.09 | | |
$ | 0.09 | |
Orion Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
| |
For the Nine Months Ended
September 30, | |
| |
2022 | | |
2021 | |
| |
Class A | | |
Class B | | |
Class A | | |
Class B | |
Basic and diluted net income per share of common stock: | |
| | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| | |
| |
Allocation of net income - basic | |
$ | 9,447,669 | | |
$ | 2,361,917 | | |
$ | 8,676,433 | | |
$ | 2,723,341 | |
Allocation of net income - diluted | |
$ | 9,447,669 | | |
$ | 2,361,917 | | |
$ | 8,613,616 | | |
$ | 2,786,158 | |
| |
| | | |
| | | |
| | | |
| | |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Basic weighted average common shares outstanding | |
| 41,400,000 | | |
| 10,350,000 | | |
| 31,997,802 | | |
| 10,043,407 | |
Diluted weighted average common shares outstanding | |
| 41,400,000 | | |
| 10,350,000 | | |
| 31,997,802 | | |
| 10,350,000 | |
| |
| | | |
| | | |
| | | |
| | |
Basic net income per share of common stock | |
$ | 0.23 | | |
$ | 0.23 | | |
$ | 0.27 | | |
$ | 0.27 | |
Diluted net income per share of common stock | |
$ | 0.23 | | |
$ | 0.23 | | |
$ | 0.27 | | |
$ | 0.27 | |
Recent Accounting Pronouncements
In June 2022, the FASB issued ASU 2022-03, ASC
Subtopic 820 “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. The ASU amends ASC 820
to clarify that a contractual sales restriction is not considered in measuring an equity security at fair value and to introduce new disclosure
requirements for equity securities subject to contractual sale restrictions that are measured at fair value. The ASU applies to both holders
and issuers of equity and equity-linked securities measured at fair value. The amendments in this ASU are effective for the Company in
fiscal years beginning after December 15, 2024, and interim periods within those fiscal years. Early adoption is permitted for both interim
and annual financial statements that have not yet been issued or made available for issuance. The Company is considering the impact of
this pronouncement on the financial statements.
The Company does not believe that any other recently
issued, but not yet effective, accounting standards updates, if currently adopted, would have a material effect on the accompanying unaudited
condensed financial statements.
3. Initial Public Offering
On March 4, 2021, the Company consummated its
Initial Public Offering of 41,400,000 Units, including 5,400,000 Over-Allotment Units, at $10.00 per Unit, generating gross proceeds of
$414.0 million, and incurring offering costs of approximately $23.5 million, of which approximately $14.5 million was for deferred underwriting
commissions.
Each Unit consists of one share of Class A common
stock and one-quarter of one redeemable warrant (each, a “Public Warrant”). Each whole Public Warrant entitles the holder
to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment, beginning on the later of (a) 30
days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering (see Note 6).
4. Related Party Transactions
Founder Shares
On December 9, 2020, the Sponsor paid an aggregate
of $25,000 to cover certain expenses and offering costs on behalf of the Company in exchange for issuance of 8,625,000 shares of the Company’s
Class B common stock, par value $0.0001 per share (the “Founder Shares”). On March 1, 2021, the Company effected a share capitalization
of 1,725,000 shares of Class B common stock, resulting in an aggregate of 10,350,000 shares of Class B common stock issued and outstanding.
The Initial Stockholders agreed, subject to limited
exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) one year after the completion
of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the closing price of the Class A common
stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like)
for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the
date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results
in all of the stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Private Placement Warrants
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the Private Placement of 7,520,000 Private Placement Warrants at a price of $1.50 per Private
Placement Warrant to the Sponsor, generating proceeds of approximately $11.3 million.
Each whole Private Placement Warrant is exercisable
for one whole share of Class A common stock at a price of $11.50 per share, beginning on the later of (a) 30 days after the completion
of a Business Combination or (b) 12 months from the closing of the Initial Public Offering. A portion of the proceeds from the sale of
the Private Placement Warrants to the Sponsor was added to the proceeds from the Initial Public Offering held in the Trust Account. If
the Company does not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless.
The Private Placement Warrants will be non-redeemable for cash and exercisable on a cashless basis so long as they are held by the Sponsor
or its permitted transferees (except as set forth in Note 6 under “Redemption of warrants when the price per shares of Class A
common stock equals or exceeds $10.00”).
Orion Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
The Sponsor and the Company’s officers and
directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days
after the completion of the initial Business Combination.
Related Party Loans
On December 8, 2020, the Sponsor agreed to loan
the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the
“Note”). The Note was non-interest bearing and payable upon the completion of the Initial Public Offering. As of March 4,
2021, the Company had borrowed approximately $136,000 under the Note. On March 8, 2021, the Company repaid the Note in full which resulted
in the Note no longer being available.
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 will 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 or, at the lenders’ discretion, up to $2.25 million
of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.50 per warrant.
The warrants would be identical to the Private Placement Warrants. As of September 30, 2022 and December 31, 2021, there were no Working
Capital Loans outstanding.
Administrative Services Agreement
Commencing on the effective date of the prospectus
for the Initial Public Offering through the earlier of consummation of the initial Business Combination and the Company’s liquidation,
the Company agreed to pay the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support.
The Company incurred $30,000 in expenses in connection with such services in the three months ended September 30, 2022 and 2021, as reflected
in the accompanying unaudited condensed statements of operations. The Company incurred $90,000 and approximately $70,000 in expenses in
connection with such services in the nine months ended September 30, 2022 and 2021, respectively, as reflected in the accompanying unaudited
condensed statements of operations. As of September 30, 2022 and December 31, 2021, approximately $183,000 and $100,000, respectively,
of such expenses are included as accrued expenses on the condensed balance sheets.
The Company’s officers or directors will be reimbursed for any
out-of-pocket expenses incurred in connection with activities on the Company’s behalf such as identifying potential target businesses
and performing due diligence on suitable Business Combinations. The Company’s audit committee reviews on a quarterly basis all payments
that were made to the Sponsor, officers or directors, or the Company’s or their affiliates. Any such payments prior to an initial
Business Combination will be made using funds held outside the Trust Account. Other than quarterly audit committee review of such payments,
the Company does not expect to have any additional controls in place governing the reimbursement payments to the Company’s directors
and officers for their out-of-pocket expenses incurred in connection with identifying and consummating an initial Business Combination.
5. Commitments and Contingencies
Registration Rights
The Initial Stockholders and holders of the Private
Placement Warrants were entitled to registration rights pursuant to a registration rights agreement. Following completion of the initial
Business Combination, the Initial Stockholders and holders of the Private Placement Warrants would be 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 would 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.
Underwriting Agreement
The underwriters were entitled to an underwriting
discount of $0.20 per Unit, or approximately $8.3 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition,
the underwriters will be entitled to a deferred fee of $0.35 per Unit, or approximately $14.5 million in the aggregate. The deferred fee
will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business
Combination, subject to the terms of the underwriting agreement.
Orion Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
Risks and Uncertainties
Management continues to evaluate the impact of
macroeconomic conditions, such as the COVID-19 pandemic, downturns in the financial markets, inflation, declines in consumer spending,
increases in interest rates, and geopolitical instability such as the war in Ukraine, on the industry and has concluded that while it
is reasonably possible that such macroeconomic conditions could have a negative effect on the Company’s financial position, results
of its operations, and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited
condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
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 domestic (i.e., U.S.) corporations and certain domestic subsidiaries of publicly
traded foreign (i.e., non-U.S.) 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 repurchase by the Company of the Company’s
stock that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, generally is expected
to be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax on redemption of Class A common
stock or other stock of the Company in connection with a Business Combination, extension vote or otherwise will depend on a number of
factors, including whether the redemption is treated as a repurchase of stock for purposes of the excise tax, (ii) the fair market value
of the redemption treated as a repurchase of stock in connection with the Business Combination, extension or otherwise, (iii) the structure
of a Business Combination, (iv) 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 redemption
treated as a repurchase of stock) and (v) the content of regulations and other guidance from the Treasury. As noted above, the excise
tax would be payable by the Company and not by the redeeming holder. The imposition of the excise tax could cause a reduction in the cash
available on hand to complete a Business Combination or for effecting redemptions such
that redeeming holders of Public Shares may receive a per-share redemption amount that is lower than what they would otherwise be
entitled to receive.
6. Derivative Warrant Liabilities
As of September 30, 2022 and December 31, 2021,
there were 10,350,000 Public Warrants and 7,520,000 Private Placement Warrants outstanding.
Warrants may only be exercised for a whole number
of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The warrants
will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of
the Initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering
the shares of Class A common stock issuable upon exercise of the warrants and a current prospectus relating to them is available (or the
Company permits holders to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from registration under
the Securities Act). The Company agreed that as soon as practicable, but in no event later than 20 business days after the closing of
the initial Business Combination, it will use its commercially reasonable efforts to file with the SEC and have an effective registration
statement covering the shares of the Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus
relating to those shares of the Class A common stock until the warrants expire or are redeemed. If a registration statement covering the
shares of the Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the
closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and
during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless
basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption.
Orion Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
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, without taking into account any Founder Shares held
by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross
proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of
the initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions), and (z) the
volume weighted average trading price of the shares 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 described under “Redemption of warrants when the
price per share of Class A common stock equals or exceeds $18.00” and “Redemption of warrants when the price per shares of
Class A common stock equals or exceeds $10.00” will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market
Value and the Newly Issued Price, and the $10.00 per share redemption trigger price described under “Redemption of warrants when
the price per share of Class A common stock equals or exceeds $10.00” will be adjusted (to the nearest cent) to be equal to the
higher of the Market Value and the Newly Issued Price.
The Private Placement Warrants are identical to
the Public Warrants, except that the Private Placement Warrants and the shares of Class A common stock issuable upon exercise of the Private
Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject
to certain limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the Sponsor
or its permitted transferees (except as set forth below under “Redemption of warrants when the price per shares of Class A common
stock equals or exceeds $10.00”). If the Private Placement Warrants are held by someone other than the Sponsor or its permitted
transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the
Public Warrants.
Redemption of warrants when the price per share
of Class A common stock equals or exceeds $18.00:
Once the warrants become exercisable, the Company
may redeem the outstanding warrants (except as described herein with respect to the Private Placement Warrants):
|
● |
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 last reported sales price of the Class A common stock equals or exceeds $18.00 per share (as adjusted) for any 20 trading days within the 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 Company will not redeem the warrants as described
above unless an effective registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise
of the warrants is effective and a current prospectus relating to those shares of Class A common stock is available throughout the 30-day
redemption period. Any such exercise would not be on a “cashless” basis and would require the exercising holder to pay the
exercise price for each warrant being exercised.
Orion Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
Redemption of warrants when the price per share
of Class A common stock equals or exceeds $10.00:
Commencing ninety days after 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, but only on a cashless basis, prior to redemption and receive that number of shares determined by reference to an agreed table based on the redemption date and the “fair market value” of Class A common stock; |
|
|
|
|
● |
if, and only if, the closing price of Class A common stock equals or exceeds $10.00 per share (as adjusted) for any 20 trading days within the 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders; and |
|
● |
if the closing price of the Class A common stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders is less than $18.00 per share (as adjusted), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above. |
The “fair market value” of Class A
common stock for the above purpose shall mean the volume-weighted average price of Class A common stock during the 10 trading days ending
on the third trading day immediately following the date on which the notice of redemption is sent to the holders of warrants. In no event
will the warrants be exercisable in connection with this redemption feature for more than 0.361 shares of Class A common stock per warrant
(subject to adjustment).
If the Company is unable to complete a Business
Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not
receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held
outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
7. Class A Common Stock Subject to Possible
Redemption
The Company’s Class A common stock features
certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of future events.
The Company is authorized to issue 500,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of the Company’s
Class A common stock are entitled to one vote for each share. As of September 30, 2022 and December 31, 2021, there were 41,400,000 shares
of Class A common stock outstanding, which were all subject to possible redemption and are classified outside of permanent equity in the
condensed balance sheets.
The Class A common stock subject to possible redemption
reflected on the condensed balance sheets is reconciled on the following table:
Gross proceeds | |
$ | 414,000,000 | |
Less: | |
| | |
Amount allocated to Public Warrants | |
| (13,980,000 | ) |
Class A common stock issuance costs | |
| (22,739,396 | ) |
Plus: | |
| | |
Accretion of carrying value to redemption value | |
| 36,719,396 | |
Class A common stock subject to possible redemption, December 31, 2021 | |
| 414,000,000 | |
Plus: | |
| | |
Increase in redemption value of Class A common stock subject to redemption | |
| 1,960,012 | |
Class A common stock subject to possible redemption, September 30, 2022 | |
$ | 415,960,012 | |
Orion Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
8. Stockholders’ Deficit
Preferred stock - The Company is
authorized to issue 1,000,000 shares of preferred stock, par value $0.0001 per share, with such designations, voting and other rights
and preferences as may be determined from time to time by the Company’s board of directors. As of September 30, 2022 and December
31, 2021, there were no shares of preferred stock issued or outstanding.
Class A Common Stock - The Company
is authorized to issue 500,000,000 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 41,400,000 shares of Class A common stock outstanding, all of which were subject to possible redemption
and are classified as temporary equity in the accompanying condensed balance sheets (see Note 7).
Class B Common Stock - The Company
is authorized to issue 50,000,000 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 10,350,000 shares of Class B common stock issued and outstanding.
Only holders of the Class B common stock will
have the right to vote on the election of directors prior to the Business Combination. Holders of Class A common stock and holders of
Class B common stock will vote together as a single class on all other matters submitted to a vote of the stockholders except as required
by law.
The Class B common stock will automatically convert
into Class A common stock at the time of the initial Business Combination on a one-for-one basis, subject to adjustment for stock splits,
stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment as provided herein. In the case that
additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in
the Initial Public Offering and related to the closing of the initial Business Combination, the ratio at which shares of Class B common
stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of
Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares
of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted
basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering
plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the initial Business Combination
(excluding any shares or equity-linked securities issued, or to be issued, to any seller in the business Combination). Holders of Class
B common stock may also elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock,
subject to adjustment as provided above, at any time.
9. Fair Value Measurements
The following table presents information about
the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2022 and December
31, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
September 30, 2022
Description | |
Quoted Prices in Active Markets (Level 1) | | |
Significant Other Observable Inputs (Level 2) | | |
Significant Other Unobservable Inputs (Level 3) | |
Assets: | |
| | |
| | |
| |
Assets held in Trust Account: | |
| | |
| | |
| |
U.S. Treasury securities | |
$ | 416,527,083 | | |
$ | - | | |
$ | - | |
Cash and cash equivalents - mutual funds | |
$ | 114,328 | | |
$ | - | | |
$ | - | |
| |
$ | 416,641,411 | | |
$ | - | | |
$ | - | |
Liabilities: | |
| | | |
| | | |
| | |
Derivative warrant liabilities - Public | |
$ | - | | |
$ | 517,500 | | |
$ | - | |
Derivative warrant liabilities - Private Placement | |
$ | - | | |
$ | - | | |
$ | 375,790 | |
Orion Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
December 31, 2021
Description | |
Quoted Prices in Active Markets (Level 1) | | |
Significant Other Observable Inputs (Level 2) | | |
Significant Other Unobservable Inputs (Level 3) | |
Assets: | |
| | |
| | |
| |
Assets held in Trust Account: | |
| | |
| | |
| |
U.S. Treasury securities | |
$ | 414,020,312 | | |
$ | - | | |
$ | - | |
Cash and cash equivalents - mutual funds | |
$ | 35,012 | | |
$ | - | | |
$ | - | |
| |
$ | 414,055,324 | | |
$ | - | | |
$ | - | |
Liabilities: | |
| | | |
| | | |
| | |
Derivative warrant liabilities - Public | |
$ | 6,727,500 | | |
$ | - | | |
$ | - | |
Derivative warrant liabilities - Private Placement | |
$ | - | | |
$ | - | | |
$ | 4,888,000 | |
Transfers to/from Levels 1, 2, and 3 are recognized at the end of the
reporting period. The estimated fair value of Public Warrants was transferred from a Level 3 measurement to a Level 1 measurement as the
Public Warrants were separately traded beginning in April 2021. The estimated fair value of the Public Warrants was transferred from a
Level 1 measurement to a Level 2 measurement due to lack of trading activity as of September 30, 2022. There were no other transfers to/from
Levels 1, 2, and 3 during the three or nine months ended September 30, 2022.
Level 1 assets include investments in U.S. Treasury
securities and investments in money market funds that invest solely in U. S. Treasury securities. The Company uses inputs such as actual
trade data, benchmark yields, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its
investments. Level 3 instruments are comprised of derivative warrant liabilities measured at fair value using a Monte Carlo simulation
model.
The fair value of warrants issued by the Company in connection with
the Initial Public Offering and Private Placement have initially been estimated using Monte Carlo simulations at each measurement date.
The Private Placement Warrants continue to be estimated using Monte Carlo simulations. As of September 30, 2022, the fair value of the
Public Warrants was measured utilizing the Level 2 input of the quoted listed trading price for such warrants. For the three months ended
September 30, 2022 and 2021, the Company recognized a gain resulting from a decrease in the fair value of derivative warrant liabilities
of approximately $715,000 and $5.5 million, respectively, presented as change in fair value of derivative warrant liabilities on the accompanying
unaudited condensed statements of operations. For the nine months ended September 30, 2022 and 2021, the Company recognized a gain resulting
from a decrease in the fair value of derivative warrant liabilities of $10.7 million and $13.5 million, respectively, presented as change
in fair value of derivative warrant liabilities on the accompanying unaudited condensed statements of operations.
The estimated fair value of the Public Warrants
and Private Placement Warrants, prior to the Public Warrants being traded in an active market, was determined using Level 3 inputs. Inherent
in a Monte Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend
yield. The Company estimates the volatility of its common stock warrants based on implied volatility from the Company’s traded warrants
and from historical volatility of select peer company’s common stock that matches the expected remaining life of the warrants. The
risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected
remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The
dividend rate is based on the historical rate, which the Company anticipates remaining at zero.
The following table provides quantitative information
regarding Level 3 fair value measurements inputs as their measurement dates:
|
|
As of
September 30,
2022 |
|
|
As of
December 31,
2021 |
|
Volatility |
|
|
5.3 |
% |
|
|
10.7 |
% |
Stock price |
|
$ |
9.85 |
|
|
$ |
9.78 |
|
Expected life of the options to convert |
|
|
5.42 |
|
|
|
5.75 |
|
Risk-free rate |
|
|
3.96 |
% |
|
|
1.32 |
% |
Dividend yield |
|
|
0.00 |
% |
|
|
0.00 |
% |
Implied Probability of Successful Business Combination |
|
|
6.92 |
% |
|
|
N/A |
|
Orion Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
The change in the fair value of the derivative
warrant liabilities measured with Level 3 inputs for nine months ended September 30, 2022 and 2021 is summarized as follows:
| |
2022 | | |
2021 | |
Derivative warrant liabilities as of January 1 | |
$ | 4,888,000 | | |
$ | - | |
Issuance of Public and Private Warrants - Level 3 | |
| - | | |
| 24,986,750 | |
Change in fair value of derivative warrant liabilities - Level 3 | |
| (2,556,800 | ) | |
| (3,141,420 | ) |
Derivative warrant liabilities as of March 31 - Level 3 | |
| 2,331,200 | | |
| 21,845,330 | |
Transfer of Public Warrants to Level 1 | |
| - | | |
| (12,198,670 | ) |
Change in fair value of derivative warrant liabilities - Level 3 | |
| (1,654,400 | ) | |
| (2,502,660 | ) |
Derivative warrant liabilities as of June 30 - Level 3 | |
| 676,800 | | |
| 7,144,000 | |
Change in fair value of derivative warrant liabilities - Level 3 | |
| (301,010 | ) | |
| (2,331,200 | ) |
Derivative warrant liabilities as of September 30 - Level 3 | |
$ | 375,790 | | |
$ | 4,812,800 | |
10. 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 available to be issued.
Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited
condensed financial statements.