Notes
to Condensed Consolidated Financial Statements
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Z-Work Acquisition Corp. (the “Company”)
was incorporated in Delaware on September 30, 2020. The Company was formed for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business
Combination”).
The Company is not limited to a particular
industry or sector for purposes of consummating a Business Combination and, as of March 31, 2021, and the Company had not, nor
had anyone on its behalf, initiated any substantive discussions, directly or indirectly, with any business combination target with
respect to the 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 March 31, 2021, the Company had not
commenced any operations. All activity for the period from September 30, 2020 (inception) through March 31, 2021 relates to the
Company’s formation and the initial public offering (“Initial Public Offering”), which is described below. 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 from the proceeds derived from the Initial Public Offering.
The registration statement for the Company’s
Initial Public Offering was declared effective on January 28, 2021. On February 2, 2021, the Company consummated the Initial Public
Offering of 23,000,000 units (the “Units” and, with respect to the Class A common stock included in the Units sold,
the “Public Shares”), which includes the full exercise by the underwriter of its over-allotment option in the amount
of 3,000,000 Units, at $10.00 per Unit, generating gross proceeds of $230,000,000 which is described in Note 3.
Simultaneously with the closing of the
Initial Public Offering, the Company consummated the sale of 4,733,333 warrants (the “Private Placement Warrants”)
at a price of $1.50 per Private Placement Warrant in a private placement to Z-Work Holdings LLC (the “Sponsor”) and
Jefferies LLC (“Jefferies”), generating gross proceeds of $7,100,000, which is described in Note 4.
Transaction costs amounted to $13,088,319,
consisting of $4,600,000 in cash underwriting fees, $8,050,000 of deferred underwriting fees and $438,319 of other offering costs,
of which $125,000 was paid through a transfer of membership interests in the Sponsor.
Following the closing of the Initial Public
Offering on February 2, 2021, an amount of $230,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the
Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”),
located in the United States and will be invested only 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 185 days
or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting certain
conditions 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 funds held in the Trust Account, as described below.
The Company’s management has broad
discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private
Placement 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 with one or more operating businesses or assets with a fair market value equal
to at least 80% of the net assets held in the Trust Account (net of amounts disbursed to management for working capital purposes,
if any, and excluding the amount of deferred underwriting discounts held in trust and taxes payable on the income earned on the
Trust Account). 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 business 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 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 $10.00
per Public Share, plus any pro rata interest then in the Trust Account, net of taxes payable). There will be no redemption rights
upon the completion of a Business Combination with respect to the Company’s warrants.
The Company will only proceed with a Business
Combination if the Company has net tangible assets of at least $5,000,001 following any related redemptions and, if the Company
seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. 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 its Amended and Restated Certificate of Incorporation (the “Certificate
of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission
(“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder
approval of the transaction is required by 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 5) and any Public Shares purchased
during or after the Initial Public Offering 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, if the Company
seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the
Certificate of Incorporation will provide 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% of the Public Shares, without the prior consent of the Company.
The Sponsor has agreed (a) to waive
its redemption rights with respect to the Founder Shares and Public Shares held by it in connection with the completion of a Business
Combination, (b) to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business
Combination by February 2, 2023 and (c) not to propose an amendment to the Certificate of Incorporation (i) to modify
the substance or timing of the Company’s obligation to allow redemptions in connection with a Business Combination or to
redeem 100% of its Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined
below) or (ii) with respect to any other provision relating to stockholders’ rights or pre-business combination activity,
unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any
such amendment. However, if the Sponsor acquires Public Shares in or after the Initial Public Offering, such Public Shares will
be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within
the Combination Period.
The Company will have until February 2,
2023 to complete a Business Combination (the “Combination Period”). If the Company has not completed a Business Combination
within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible but 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 pay 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), 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. There will be no redemption rights or liquidating distributions
with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination
within the Combination Period.
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 third party 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 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 prospective target business who executed a waiver of any and all rights to monies held
in the Trust Account nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public
Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities
Act”). 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 for the Company’s independent registered public accounting firm), prospective target businesses and 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.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The accompanying unaudited condensed financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC.
Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been
condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not
include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or
cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting
of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash
flows for the periods presented.
The accompanying unaudited condensed financial
statements should be read in conjunction with the Company’s prospectus for its Initial Public Offering as filed with the
SEC on February 1, 2021, as well as the Company’s Current Report on Form 8-K, as filed with the SEC on February 8, 2021 (see
Note 2). The interim results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected
for the year ending December 31, 2021 or for any future periods.
Correction of Previously Issued Financial
Statements
On April 12, 2021, the Acting Director
of the Division of Corporation Finance and Acting Chief Accountant of the SEC together issued a statement regarding the accounting
and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting
and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC
Statement”). Specifically, the SEC Statement focused on certain settlement terms and provisions related to certain tender
offers following a business combination, which terms are similar to those contained in the warrant agreement governing the Company’s
warrants. As a result of the SEC Statement, the Company reevaluated the accounting treatment of (i) the 15,000,000 redeemable warrants
(the “Public Warrants”) that were included in the units issued by the Company in its initial public offering (the “Initial
Public Offering”) and (ii) the 7,333,333 redeemable warrants that were issued to the Company’s sponsor in a private
placement that closed concurrently with the closing of the Initial Public Offering (together with the Public Warrants, the “Warrants”).
The Company previously accounted for the Warrants as components of equity.
In further consideration of the guidance
in the Accounting Standard Codification (“ASC”) 815-40, “Derivatives and Hedging – Contracts on an Entity’s
Own Equity” (“ASC 815-40”), the Company concluded that the Warrants should be recorded as a derivative liability
under the guidance of rather than as a component of equity, which impacts certain line items related to the previously audited
balance sheet as of February 2, 2021, included in the Company’s Current Report on Form 8-K filed with the SEC on February
8, 2021.
The following table summarizes the effect
of the correction to the balance sheet date line items as of the date indicated:
|
|
As of
|
|
|
|
February 2, 2021
|
|
|
|
As Reported
|
|
|
As Revised
|
|
|
Difference
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet as of February 2, 2021 (audited)
|
|
|
|
|
|
|
|
|
|
Warrant Liabilities
|
|
$
|
—
|
|
|
$
|
13,829,334
|
|
|
$
|
13,829,334
|
|
Class A Common Stock Subject to Redemption
|
|
|
219,160,920
|
|
|
|
(13,829,334
|
)
|
|
|
205,331,586
|
|
Class A Common Stock
|
|
|
108
|
|
|
|
139
|
|
|
|
247
|
|
Additional Paid-in Capital
|
|
|
5,000,079
|
|
|
|
489,260
|
|
|
|
5,489,339
|
|
Accumulated Deficit
|
|
|
(761
|
)
|
|
|
(489,399
|
)
|
|
|
(490,160
|
)
|
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 a company can elect to opt out of the extended transition period and comply with the requirements that apply
to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such
extended transition period which means that when a standard is issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company,
which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition
period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of the condensed financial
statements in conformity with 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 financial statements and
the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to
exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or
set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate,
could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included
in these financial statements is the determination of the fair value of the warrant liability. 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 did not have any cash equivalents
as of March 31, 2021 and December 31, 2020.
Offering Costs
Offering costs consist of legal, accounting,
underwriting fees and other costs incurred through the balance sheet date that are directly related to the Initial Public Offering.
Offering costs amounting to $12,598,919 were charged to stockholders’ equity or as period costs upon the completion of the
Initial Public Offering, and $489,399 of the offering costs were related to the warrant liabilities and charged to the statement
of operations.
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.”
Shares of Class A common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair
value. Conditionally redeemable common stock (including common stock that features redemption rights that is either within the
control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control)
is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. 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, at March 31, 2021, Class A common stock subject to possible redemption is
presented as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
Warrant Liability
The Company accounts for the Warrants in
accordance with the guidance contained in ASC 815-40 under which the Warrants do not meet the criteria for equity treatment and
must be recorded as liabilities. Accordingly, the Company classifies the Warrants as liabilities at their fair value and adjusts
the Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until
exercised, and any change in fair value is recognized in our statement of operations. See Note 8 for further discussion of the
pertinent terms of the Warrants and Note 9 for further discussion of the methodology used to determine the value of the warrant
liabilities.
Income Taxes
The Company follows the asset and liability
method of accounting for income taxes under 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. As of March 31, 2021, the Company had a deferred tax asset of approximately $63,500, which had a full valuation
allowance. The Company’s deferred tax assets were deemed to be de minimis as of March 31, 2021.
The Company’s current taxable income
primarily consists of interest earned on the Trust Account. The Company’s general and administrative costs are generally
considered start-up costs and are not currently deductible. The change in fair value of the warrant liability is a permanent difference.
During the three months ended March 31, 2021, the Company recorded no income tax expense. The Company’s effective tax rate
for three months ended March 31, 2021 was 0%, which differs from the expected income tax rate due to the start-up costs (discussed
above) which are not currently deductible and permanent differences.
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 accrued for interest and penalties as of March 31, 2021 and December
31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or
material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
Net Income (Loss) per Common Share
Net income (loss) per share is computed
by dividing net income (loss) by the weighted average number of common shares outstanding for the period. The Company has not considered
the effect of warrants sold in the Initial Public Offering and private placement to purchase 12,400,000 shares of Class A
common stock in the calculation of diluted income per share, since the exercise price of the warrants was below the average market
price for the period.
The Company’s statement
of operations includes a presentation of income (loss) per share for common shares subject to possible redemption in a manner similar
to the two-class method of income (loss) per share. Net income per common share, basic and diluted, for Class A redeemable common
stock is calculated by dividing the interest income earned on the Trust Account less applicable income and franchise taxes, by
the weighted average number of Class A redeemable common stock outstanding since original issuance. Net loss per share, basic and
diluted, for Class B non-redeemable common stock is calculated by dividing the net loss, adjusted for income attributable to Class
A redeemable common stock, net of applicable franchise and income taxes, by the weighted average number of Class B non-redeemable
common stock outstanding for the period. Class B non-redeemable common stock includes the Founder Shares as these shares do not
have any redemption features and do not participate in the income earned on the Trust Account.
The following table reflects the calculation
of basic and diluted net income (loss) per common share (in dollars, except per share amounts):
|
|
Three Months
Ended
March 31,
|
|
|
2021
|
Redeemable Class A Common Stock
|
|
|
Numerator: Earnings allocable to Redeemable Class A Common Stock
|
|
|
Interest Income
|
|
$
|
4,868
|
|
Less: Income and Franchise Tax
|
|
|
(4,868
|
)
|
Net Earnings
|
|
$
|
—
|
|
Denominator: Weighted Average Redeemable Class A Common Stock
|
|
|
|
|
Redeemable Class A Common Stock, Basic and Diluted
|
|
|
23,000,000
|
|
Earnings/Basic and Diluted Redeemable Class A Common Stock
|
|
$
|
—
|
|
|
|
|
|
|
Non-Redeemable Class B Common Stock
|
|
|
|
|
Numerator: Net Income minus Redeemable Net Earnings
|
|
|
|
|
Net Income
|
|
$
|
4,016,398
|
|
Redeemable Net Earnings
|
|
|
—
|
|
Non-Redeemable Net Earnings
|
|
$
|
4,016,398
|
|
Denominator: Weighted Average Non-Redeemable Class B Common Stock
|
|
|
|
|
Non-Redeemable Class B Common Stock, Basic and Diluted
|
|
|
5,475,000
|
|
Earnings/Basic and Diluted Non-Redeemable Class B Common Stock
|
|
$
|
0.73
|
|
As of March 31, 2021, basic and diluted
shares are the same as there are no non-redeemable securities that are dilutive to the Company’s stockholders.
Concentration of Credit Risk
Financial instruments that potentially
subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times may exceed
the Federal Depository Insurance Corporation coverage limit of $250,000. As of March 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 ASC Topic 820, “Fair Value Measurement,” approximates
the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature.
Recent Accounting Standards
In August 2020, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion
and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40)
(“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models
that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative
scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also
introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s
own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method
for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective
basis, with early adoption permitted beginning on January 1, 2021. The Company is currently assessing the impact, if any, that
ASU 2020-06 would have on its financial position, results of operation or cash flows.
NOTE 3. PUBLIC OFFERING
Pursuant to the Initial Public Offering,
the Company sold 23,000,000 Units, which includes a full exercise by the underwriters of their over-allotment option in the amount
of 3,000,000 Units, at a price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and one-third of
one redeemable warrant (“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 (see Note 7).
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the
Initial Public Offering, the Sponsor and Jefferies purchased an aggregate of 4,733,333 Private Placement Warrants (3,966,666 warrants
to the Sponsor and 766,667 warrants to Jefferies), at a price of $1.50 per Private Placement Warrant ($7,100,000) from the Company
in a private placement. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price
of $11.50 per share, subject to adjustment (see Note 7). The proceeds from the sale of the Private Placement Warrants were
added to the net 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 proceeds from the sale of the Private Placement Warrants held in the Trust Account
will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement
Warrants will expire worthless.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On December 1, 2020, the Sponsor purchased
5,750,000 shares (the “Founder Shares”) of the Company’s Class B common stock for an aggregate price of
$25,000. The Founder Shares included an aggregate of up to 750,000 shares subject to forfeiture to the extent that the underwriters’
over-allotment was not exercised in full or in part, so that the number of Founder Shares would equal, on an as-converted basis,
approximately 20% of the Company’s issued and outstanding common stock after the Initial Public Offering. As a result of
the underwriters’ election to fully exercise their over-allotment option, no Founder Shares are currently subject to forfeiture.
The Sponsor has 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 a Business Combination and (B) subsequent to a Business Combination, (x) if the last reported sale price
of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations,
recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after
a 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 Public Stockholders having the right to exchange their shares of common stock for
cash, securities or other property.
Administrative Services Agreement
The Company had agreed to pay the Sponsor
$10,833 per month for up to 24 months, equal to $130,000 per year through the earlier of the Company’s consummation of a
Business Combination and its liquidation. In light of additional administrative support services to be provided, the Company amended
and restated the administrative support agreement to provide that, as of February 1, 2021, the Company would pay the Sponsor $12,500
per month, or $150,000 per year, $100,000 of which will be paid to the Company’s President and Chief Financial Officer as
an annual cash salary and $50,000 will be paid for additional support services sourced from Communitas Capital, a venture firm
of which the Company’s Executive Co-Chairman is Managing Partner. For the three months ended March 31, 2021, the Company
incurred $46,666 in fees for these services, of which such amount is included in accrued expenses in the accompanying March 31,
2021 condensed balance sheet.
Promissory Note — Related Party
On October 1, 2020, the Sponsor issued an unsecured
promissory note to the Company (the “Promissory Note”), pursuant to which the Company may borrow up to an aggregate principal
amount of $300,000. The Promissory Note is non-interest bearing. As of December 31, 2020, there was $38,711 in borrowings outstanding
under the Promissory Note, and as of March 31, 2021, there were no borrowings outstanding under the Promissory Note.
Related Party Loans
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 $1,500,000 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 March 31, 2021 and December 31, 2020, no such Working Capital Loans were outstanding.
PSAM
P. Schoenfeld Asset Management LP, an institutional
investor (the “anchor investor” or “PSAM”) purchased 2,000,000 of the units sold in the Initial Public
Offering, or 8.7% of the units sold in our Initial Public Offering, at the public offering price of $10.00 per unit. The anchor
investor is not affiliated with the Company, the Sponsor or any of the Company’s officers or directors.
PSAM has also purchased membership interests
in our sponsor representing an indirect beneficial interest in 400,000 founder shares and 666,667 private placement warrants held
by our sponsor (which we refer to as the “anchor founder shares” and “anchor private placement warrants”,
respectively) for $1,000,000, which represents a price for founder shares and private placement warrants equal to those paid by
other outside investors in our sponsor. The terms to which the anchor founder shares and the anchor private placement warrants,
respectively, are subject are also substantially identical to the terms to which the remaining founder shares and private placement
warrants, respectively, are subject, except that: (i) PSAM will receive no anchor founder shares or anchor private placement warrants
if it does not pay the $1,000,000 purchase price; (ii) PSAM will forfeit, for no additional consideration or refund, 75% of the
anchor founder shares and 75% of the anchor private placement warrants it has purchased if it does not also purchase 9.9% of the
units in our offering (without regard to the exercise of the over-allotment option), or if it purchases such units but sells units
or public shares or redeems public shares prior to or in connection with the completion of our initial business combination such
that it no longer holds public shares equal in number to at least 9.9% of the number of units sold in our offering (without regard
to the exercise of the over-allotment option). Following the completion of our initial business combination, the anchor founder
shares and the anchor private placement warrants, respectively, will be subject to the same lock-up restrictions as all other founder
shares and private placement warrants, respectively. Following the completion of our initial business combination, PSAM’s
public shares will be subject to a lock-up restricting their sale or other transfer, such that 50% of such shares will become freely
tradable (subject to applicable securities laws) after 30 days and the remaining 50% of such shares will become freely tradable
(subject to applicable securities laws) after 90 days. If PSAM does not sell units or public shares or redeem public shares such
that it holds a lesser number of public shares than 9.9% of the number of units sold in our offering and complies with the post-business
combination lock-ups, then our sponsor will thereafter extend to PSAM a right of first refusal to participate on substantially
similar terms in our sponsor’s next special purpose acquisition company (if any) and, if PSAM similarly invests and holds
in any such second special purpose acquisition company, then our sponsor will extend to PSAM a right of first refusal to participate
on substantially similar terms in our sponsor’s next special purpose acquisition company thereafter (if any).
PSAM has not been granted any additional
shareholder or other rights, and through its membership interests in our sponsor will have no right to control our sponsor or vote
or dispose of any founder shares (which will continue to be held and voted by our sponsor until after our initial business combination).
In addition, PSAM is not required to vote any of its public shares in favor of our initial business combination or for or against
any other matter presented for a shareholder vote. Nevertheless, purchases by PSAM of units in our offering, or of our securities
in the open market after the completion of our offering, or both, could potentially allow PSAM to control a sufficient number of
public shares to influence the conduct of our business, including with respect to a business combination. No assurance can be given
as to the amount of securities PSAM may retain or purchase in the open market following our offering.
NOTE 6. COMMITMENTS
Registration Rights
Pursuant to a registration rights agreement
entered into on January 28, 2021, the holders of the Founder Shares, Private Placement Warrants and warrants that may be issued
upon conversion of Working Capital Loans (and any Class A common stock issuable upon the exercise of the Private Placement
Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares) will
have registration rights to require the Company to register a sale of any of the securities held by them. The holders of these
securities will 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 will have “piggy-back” registration rights
to include their securities in other registration statements filed by the Company, subject to certain limitations. The registration
rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering our
securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters are entitled to a deferred
fee of $0.35 per Unit, or $8,050,000 in the aggregate, of which $6.9 million is deferred and held in the Trust Account and $1.15
million was used to purchase warrants in connection with our offering. 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.
NOTE 7. STOCKHOLDERS’ EQUITY
Preferred Stock — The
Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation,
rights and preferences as may be determined from time to time by the Company’s board of directors. At March 31, 2021 and
December 31, 2020, there were no shares of preferred stock issued or outstanding.
Class A Common Stock —
The Company is authorized to issue 300,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders
of Class A common stock are entitled to one vote for each share. At March 31, 2021, there were 2,016,262 shares of Class A
common stock issued and outstanding, excluding 20,983,738 shares of Class A common stock subject to possible redemption. At
December 31, 2020, there were no shares of Class A common stock issued or outstanding.
Class B Common Stock —
The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001 per share. At March
31, 2021 and December 31, 2020, there were 5,750,000 shares of Class B common stock issued and outstanding.
Holders of Class A common stock and
holders of Class B common stock will vote together as a single class on all matters submitted to a vote of our stockholders
except as otherwise required by law.
The shares of Class B common stock
will automatically convert into Class A common stock at the time of a Business Combination, or earlier at the option of the
holder, on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock or equity-linked
securities are issued or deemed issued in connection with a Business Combination, the number of shares of Class A common stock
issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis, 20% of the sum of the
total number of all shares of common stock outstanding upon the completion of the Initial Public Offering, plus the total number
of shares of Class A common stock issued, or deemed issued or issuable upon conversion or exercise of any equity-linked securities
or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of a Business Combination,
excluding any shares of Class A common stock or equity-linked securities exercisable for or convertible into shares of Class A
common stock issued, or to be issued, to any seller in the a Business Combination and any private placement-equivalent warrants
issued to the Sponsor, officers or directors upon conversion of Working Capital Loans; provided that such conversion of Founder
Shares will never occur on a less than one for one basis.
NOTE 8. WARRANTS
As of March 31, 2021, there were 7,666,667
Public Warrants outstanding. As of December 31, 2020, there were no warrants outstanding. Public Warrants may only be exercised
for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade.
The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and
(b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years after the completion
of a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated to deliver
any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant
exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock
underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations
with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A
common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered,
qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
The Company has agreed that as soon as
practicable, but in no event later than 15 business days after the closing of a Business Combination, it will use its best efforts
to file with the SEC a registration statement registering the issuance of the shares of Class A common stock issuable upon
exercise of the warrants, to cause such registration statement to become effective and to maintain a current prospectus relating
to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement.
If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective
by the 60th business day after the closing of a Business Combination or 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.
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 Public Warrants:
|
●
|
in whole and not in part;
|
|
|
|
|
●
|
upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and
|
|
|
|
|
●
|
if, and only if, the closing price of the Class A common stock equals or exceeds $18.00 per share (as adjusted) on the trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.
|
If and when the warrants become redeemable
by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities
for sale under all applicable state securities laws.
Redemption of Warrants When the Price
per share of Class A common stock Equals or Exceeds $10.00 —Once the warrants become exercisable, the Company may
redeem the outstanding warrants:
|
●
|
in whole and not in part, and only if the Private Placement Warrants are simultaneously redeemed;
|
|
|
|
|
●
|
at a price of $0.01 per warrant;
|
|
|
|
|
●
|
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 based on the redemption date and the “fair market value” of the shares of Class A common stock;
|
|
|
|
|
●
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if, and only if, the closing price of the Class A common stock equals or exceeds $10.00 per public share (as adjusted) on the trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.
|
|
|
|
The exercise price and number of Class A
common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a
share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described
below, the Public Warrants will not be adjusted for issuances of Class A common stock at a price below its exercise price.
Additionally, in no event will the Company be required to net cash settle the Public 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
Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution
from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public
Warrants may expire worthless.
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 its 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 Company’s 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 Company’s initial Business Combination on the date of the consummation of such initial Business Combination
(net of redemptions), and (z) the volume weighted average trading price of the Company’s 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 and the $18.00 per share redemption
trigger price described above 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 above will be adjusted (to the nearest cent)
to be equal to the higher of the Market Value and the Newly Issued Price.
As of March 31, 2021, there were 4,733,333
Private Placement Warrants outstanding . As of December 31, 2020, no warrants were outstanding. The Private Placement Warrants
are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement
Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable,
assignable or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.
Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable, except as described
above, so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are
held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable
by the Company and exercisable by such holders on the same basis as the Public Warrants.
NOTE 9. 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 our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
At March 31, 2021, assets held in the Trust
Account were comprised of $550 in cash and $230,004,318 in U.S. Treasury securities. During the three months ended March 31, 2021,
the Company did not withdraw any interest income from the Trust Account.
The following table presents
information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31,
2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
|
|
Held-To-Maturity
|
|
Level
|
|
Amortized
Cost
|
|
Gross
Holding
Gain
|
|
Fair Value
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
U.S. Treasury Securities (Mature on 5/06/2021)
|
|
1
|
|
$
|
230,004,318
|
|
|
$
|
14,081
|
|
|
$
|
230,018,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
Warrant Liability – Public Warrants
|
|
1
|
|
|
|
|
|
|
|
|
|
|
5,520,000
|
|
March 31, 2021
|
|
Warrant Liability – Private Placement Warrants
|
|
3
|
|
|
|
|
|
|
|
|
|
|
3,502,666
|
|
The Warrants were accounted
for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on our accompanying March 31,
2021 condensed balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes
in fair value presented within change in fair value of warrant liabilities in the condensed statement of operations.
The Private Placement Warrants
were valued using Black Scholes Option Pricing Model, which is considered to be a Level 3 fair value measurement. The Modified
Black Scholes model’s primary unobservable input utilized in determining the fair value of the Private Placement Warrants
is the expected volatility of the common stock. The expected volatility as of the Initial Public Offering date was derived from
observable public warrant pricing on comparable ‘blank-check’ companies without an identified target. The Public Warrants
were initially valued using a Monte Carlo simulation approach. For periods subsequent to the detachment of the warrants from the
Units, the closing trading price for the public warrants was used as the fair value.
The key inputs into the Black Scholes model
and the Monte Carlo Simulation for the warrants were as follows:
Input
|
|
February 2,
2021
|
|
|
March 31, 2021
|
|
Market price
|
|
$
|
9.63
|
|
|
$
|
9.72
|
|
Risk-free interest rate
|
|
|
0.58
|
%
|
|
|
1.04
|
%
|
Dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Effective volatility
|
|
|
18,16
|
%
|
|
|
12.7
|
%
|
Exercise price
|
|
$
|
11.50
|
|
|
$
|
11.50
|
|
Time to expiration
|
|
|
5.59
|
|
|
|
5.59
|
|
The following table presents the changes in
the fair value of warrant liabilities using Level 3 fair value measurements:
|
|
Private Placement
Warrants
|
|
Public
Warrants
|
|
Warrant
Liabilities
|
Fair value as of January 1, 2021
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Initial measurement on February 2, 2021
|
|
|
5,396,000
|
|
|
|
8,433,334
|
|
|
|
13,829,334
|
|
Change in valuation inputs or other assumptions
|
|
|
(1,893,334
|
)
|
|
|
(2,913,334
|
)
|
|
|
(4,806,668
|
)
|
Transfer to Level 1
|
|
|
—
|
|
|
|
(5,520,000
|
)
|
|
|
(5,520,000
|
)
|
Fair value as of March 31, 2021
|
|
$
|
3,502,666
|
|
|
|
—
|
|
|
|
3,502,666
|
|
Transfers to/from Levels 1, 2 and 3 are recognized
at the end of the reporting period in which a change in valuation technique or methodology occurs. The estimated fair value of
the public warrants transferring from a Level 3 measurement to a Level 1 fair value measurement during the three months ended March
31, 2021 was approximately $5.5 million.
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated subsequent events
and transactions that occurred after the balance sheet date up to the date that the 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.