ITEM 1. FINANCIAL STATEMENTS
CLASS ACCELERATION CORP.
CONDENSED BALANCE SHEETS
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
|
(unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Cash
|
|
$
|
861,855
|
|
|
$
|
76,602
|
|
Prepaid expenses
|
|
|
276,031
|
|
|
|
-
|
|
Deferred offering costs
|
|
|
-
|
|
|
|
96,080
|
|
Total current assets
|
|
|
1,137,886
|
|
|
|
172,682
|
|
Prepaid expenses, non-current
|
|
|
147,768
|
|
|
|
-
|
|
Marketable securities held in Trust Account
|
|
|
258,756,914
|
|
|
|
-
|
|
Total Assets
|
|
$
|
260,042,568
|
|
|
$
|
172,682
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
$
|
164,326
|
|
|
$
|
8,732
|
|
Due to related party
|
|
|
51,117
|
|
|
|
56,560
|
|
Promissory note - related party
|
|
|
-
|
|
|
|
85,230
|
|
Total current liabilities
|
|
|
215,443
|
|
|
|
150,522
|
|
Warrant liability
|
|
|
16,558,403
|
|
|
|
-
|
|
Deferred underwriting fees
|
|
|
9,056,250
|
|
|
|
-
|
|
Total liabilities
|
|
|
25,830,096
|
|
|
|
150,522
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 8)
|
|
|
|
|
|
|
|
|
Class A common stock subject to possible redemption, 22,921,247 shares and 0 shares at redemption value at June 30, 2021 and December 31, 2020, respectively
|
|
|
229,212,470
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Class A common stock, $0.0001 par value; 200,000,000 shares authorized; 2,953,753 shares and 0 shares issued and outstanding (excluding 22,921,247 shares and 0 shares subject to possible redemption) at June 30, 2021 and December 31, 2020, respectively
|
|
|
296
|
|
|
|
-
|
|
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 6,468,750 shares issued and outstanding at June 30, 2021 and December 31, 2020
|
|
|
647
|
|
|
|
647
|
|
Additional paid-in capital
|
|
|
5,853,185
|
|
|
|
24,353
|
|
Accumulated deficit
|
|
|
(854,126
|
)
|
|
|
(2,840
|
)
|
Total stockholders’ equity
|
|
|
5,000,002
|
|
|
|
22,160
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
260,042,568
|
|
|
$
|
172,682
|
|
The accompanying notes are an integral part of
these unaudited condensed financial statements.
CLASS ACCELERATION CORP.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
For the
three months
ended
June 30,
2021
|
|
|
For the
six months
ended
June 30,
2021
|
|
Formation and operating costs
|
|
$
|
292,250
|
|
|
$
|
514,610
|
|
Loss from operations
|
|
|
(292,250
|
)
|
|
|
(514,610
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
Unrealized (loss) gain on change in fair value of warrants
|
|
|
(3,789,264
|
)
|
|
|
272,030
|
|
Bank interest income
|
|
|
54
|
|
|
|
54
|
|
Interest income
|
|
|
3,933
|
|
|
|
6,914
|
|
Transaction costs in connection with IPO
|
|
|
-
|
|
|
|
(615,674
|
)
|
Total other expense
|
|
|
(3,785,277
|
)
|
|
|
(336,676
|
)
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(4,077,527
|
)
|
|
$
|
(851,286
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption
|
|
|
23,328,999
|
|
|
|
20,602,577
|
|
Basic and diluted net income per share
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, non-redeemable common stock
|
|
|
9,014,751
|
|
|
|
8,788,825
|
|
Basic and diluted net loss per share
|
|
$
|
(0.45
|
)
|
|
$
|
(0.10
|
)
|
The accompanying notes are an integral part of
these unaudited condensed financial statements.
CLASS ACCELERATION CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30,
2021
(Unaudited)
|
|
Class A Common Stock
|
|
|
Class B Common Stock
|
|
|
Additional
Paid-in
|
|
|
(Accumulated
Deficit)
Retained
|
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Equity
|
|
Balance as of December 31, 2020
|
|
|
-
|
|
|
$
|
-
|
|
|
|
6,468,750
|
|
|
$
|
647
|
|
|
$
|
24,353
|
|
|
$
|
(2,840
|
)
|
|
$
|
22,160
|
|
Sale of 25,875,000 Units, net of underwriting discount, offering expenses, and warrant liability
|
|
|
25,875,000
|
|
|
|
2,588
|
|
|
|
-
|
|
|
|
-
|
|
|
|
235,039,010
|
|
|
|
-
|
|
|
|
235,041,598
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,226,241
|
|
|
|
3,226,241
|
|
Initial value of Class A common stock subject to possible redemption
|
|
|
(22,944,680
|
)
|
|
|
(2,295
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(229,444,505
|
)
|
|
|
-
|
|
|
|
(229,446,800
|
)
|
Change in Class A common stock subject to possible redemption
|
|
|
(384,319
|
)
|
|
|
(38
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,843,152
|
)
|
|
|
-
|
|
|
|
(3,843,190
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2021
|
|
|
2,546,001
|
|
|
$
|
255
|
|
|
|
6,468,750
|
|
|
$
|
647
|
|
|
$
|
1,775,706
|
|
|
$
|
3,223,401
|
|
|
$
|
5,000,009
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,077,527
|
)
|
|
|
(4,077,527
|
)
|
Change in Class A common stock subject to possible redemption
|
|
|
407,752
|
|
|
|
41
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,077,479
|
|
|
|
-
|
|
|
|
4,077,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2021
|
|
|
2,953,753
|
|
|
$
|
296
|
|
|
|
6,468,750
|
|
|
$
|
647
|
|
|
$
|
5,853,185
|
|
|
$
|
(854,126
|
)
|
|
$
|
5,000,002
|
|
The accompanying notes are an integral part of
these unaudited condensed financial statements.
CLASS ACCELERATION CORP.
CONDENSED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2021
(Unaudited)
Cash flows from Operating Activities:
|
|
|
|
Net loss
|
|
$
|
(851,286
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
Transaction costs in connection with IPO
|
|
|
615,674
|
|
Unrealized gain on change in fair value of warrants
|
|
|
(272,030
|
)
|
Interest earned on marketable securities held in Trust Account
|
|
|
(6,914
|
)
|
Changes in current assets and current liabilities:
|
|
|
|
|
Prepaid expenses
|
|
|
(423,799
|
)
|
Accrued expenses
|
|
|
155,594
|
|
Due to related party
|
|
|
(5,443
|
)
|
Net cash used in operating activities
|
|
|
(788,204
|
)
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
Purchase of Investment held in Trust Account
|
|
|
(258,750,000
|
)
|
Net cash used in investing activities
|
|
|
(258,750,000
|
)
|
|
|
|
|
|
Cash flows from Financing Activities:
|
|
|
|
|
Proceeds from Initial Public Offering, net of underwriters’ fees
|
|
|
253,575,000
|
|
Proceeds from private placement
|
|
|
7,175,000
|
|
Proceeds from promissory note to related party
|
|
|
20,000
|
|
Repayment of promissory note to related party
|
|
|
(105,230
|
)
|
Payment of offering costs
|
|
|
(341,313
|
)
|
Net cash provided by financing activities
|
|
|
260,323,457
|
|
|
|
|
|
|
Net change in cash
|
|
|
785,253
|
|
Cash, beginning of the period
|
|
|
76,602
|
|
Cash, end of the period
|
|
$
|
861,855
|
|
|
|
|
|
|
Supplemental disclosure of noncash investing and financing activities:
|
|
|
|
|
Deferred underwriting commissions charged to additional paid in capital
|
|
$
|
9,056,250
|
|
Initial value of Class A common stock subject to possible redemption
|
|
$
|
229,446,800
|
|
Change in value of Class A common stock subject to possible redemption
|
|
$
|
(234,330
|
)
|
Initial classification of warrant liability
|
|
$
|
16,830,433
|
|
The accompanying notes are an integral part of
these unaudited condensed financial statements.
CLASS
ACCELERATION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Note
1 — Organization and Business Operations
Organization
and General
Class
Acceleration Corp. (the “Company”) is a newly organized blank check company incorporated as a Delaware corporation on August
24, 2020. The Company was originally known as Class Acquisition Corporation. On November 16, 2020, the Company filed an amendment to
its amended and restated certificate of incorporation to change its name to Class Acceleration Corp. 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 (“Business Combination”). The Company has not selected any specific business combination target and
the Company has not, nor has anyone on its behalf, initiated any substantive discussions, directly or indirectly, with any business combination
target with respect to the Business Combination.
The
Company has selected December 31 as its fiscal year end.
As
of June 30, 2021, the Company had not commenced any operations. All activity for the period from August 24, 2020 (inception) through
June 30, 2021 relates to the Company’s formation and the initial public offering (“IPO”), which is described below,
and, since the closing of the IPO, 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 will generate non-operating income
in the form of interest income from the proceeds derived from the IPO and will recognize changes in the fair value of warrant liability
as other income (expense).
The
Company’s sponsor is Class Acceleration Sponsor LLC, a Delaware limited liability company (the “Sponsor”).
Financing
The
registration statement for the Company’s IPO was declared effective on January 14, 2021 (the “Effective Date”). On
January 20, 2021, the Company consummated the IPO of 25,875,000 units, including 3,375,000 units pursuant to the exercise of the underwriters’
over-allotment option in full, (the “Units” and, with respect to the shares of common stock included in the Units being offered,
the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $258,750,000, which is discussed in Note 3.
Simultaneously
with the closing of the IPO, the Company consummated the sale of 7,175,000 Private Placement Warrants (the “Private Placement Warrants”)
at a price of $1.00 per Private Placement Warrant in a private placement to the Sponsor, generating total gross proceeds of $7,175,000,
which is described in Note 4.
Transaction
costs amounted to $14,668,643 consisting of $5,175,000 of underwriting discount, $9,056,250 of deferred underwriting discount, and $437,393
of other offering costs.
Trust
Account
Following
the closing of the IPO on January 20, 2021, $258,750,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the IPO
and the sale of the Private Placement Warrants was placed in a Trust Account, which may only be invested in United States “government
securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money
market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S.
government treasury obligations. Except with respect to interest earned on the funds held in the Trust Account that may be released to
the Company to pay its taxes, if any, the funds held in the Trust Account will not be released until the earliest to occur of (a) the
completion of the Company’s initial Business Combination, (b) the redemption of any public shares properly tendered in connection
with a stockholder vote to amend the Company’s second amended and restated certificate of incorporation, and (c) the redemption
of all of the Company’s public shares if the Company has not completed the initial Business Combination within 24 months from the
closing of this offering (the “Combination Period”), subject to applicable law. The proceeds deposited in the Trust Account
could become subject to the claims of the Company’s creditors, if any, which could have priority over the claims of the Company’s
public stockholders.
Initial
Business Combination
The
Company’s Business Combination must be with one or more target businesses that together have a fair market value equal to at least
80% of the balance in the Trust Account (net of taxes payable) at the time of the signing an agreement to enter into a 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 outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to
be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able
to successfully effect a Business Combination.
The
Company will provide its public stockholders with the opportunity to redeem all or a portion of their Class A common stock upon the completion
of the initial Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or
(ii) without a stockholder vote by means of a tender offer. The decision as to whether the Company will seek stockholder approval of
a proposed Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The stockholders will
be entitled to redeem their shares for a pro rata share of the aggregate amount then on deposit in the Trust Account (initially anticipated
to be approximately $10.00 per public share, including any pro rata interest earned on the funds held in the Trust Account and not previously
released to the Company to pay its taxes).
The
shares of common stock subject to redemption are recorded at a redemption value and classified as temporary equity upon the completion
of the IPO, in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from
Equity.” In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least
$5,000,001 upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the issued
and outstanding shares voted are voted in favor of the Business Combination.
If
the Company has not completed an initial Business Combination within the Combination Period, the Company will redeem 100% of the public
shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest
earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes, if any (less up to $100,000
of interest to pay dissolution expenses), divided by the number of then outstanding public shares, subject to applicable law, and then
seek to dissolve and liquidate.
The
Sponsor, officers and directors have agreed to (i) waive their redemption rights with respect to their founder shares and public shares
in connection with the completion of the initial Business Combination, (ii) waive their redemption rights with respect to their founder
shares and public shares in connection with a stockholder vote to approve an amendment to the Company’s second amended and restated
certificate of incorporation, and (iii) waive their rights to liquidating distributions from the Trust Account with respect to their
founder shares if the Company does not complete the initial Business Combination within the Combination Period.
The
Company’s Sponsor has agreed that they will be liable to the Company if and to the extent any claims by a third party (other than
the Company’s independent public accountants) for services rendered or products sold to the Company, or by 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 (i) $10.00 per public share or (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 share due to reductions in the value of the trust assets, in each case net of the interest
which may be withdrawn to pay the Company’s taxes. This liability will not apply with respect to any claims by a third party who
executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity
of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that
an executed waiver is deemed to be unenforceable against a third party, then the Sponsor will not be responsible to the extent of any
liability for such third party claims. The Company has not independently verified whether the Sponsor has sufficient funds to satisfy
its indemnity obligations and believe that the Sponsor’s only assets are securities of the Company. None of the Company’s
officers will indemnify the Company for claims by third parties including, without limitation, claims by vendors and prospective target
businesses.
Liquidity
and Capital Resources
As
of June 30, 2021, the Company had approximately $0.9 million in its operating bank account, and working capital of approximately $0.9
million.
Prior
to the completion of the Initial Public Offering, the Company’s liquidity needs had been satisfied through a payment from the Sponsor
of $25,000 (see Note 5) for the Founder Shares, the loan under an unsecured promissory note from the Sponsor of $105,230, and advances
from related party of $100 (see Note 5). The Company fully paid the note to the Sponsor and the related party advances on January 29,
2021. Subsequent to the consummation of the Initial Public Offering and Private Placement, the Company’s liquidity needs have been
satisfied through the proceeds from the consummation of the Private Placement not held in the Trust Account.
In
addition, in order to finance transaction costs in connection with a Business Combination, the Company’s 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 below (see Note 5). To date, there were no amounts outstanding under any Working Capital Loans.
Based
on the foregoing, management believes that the Company will have sufficient working capital to meet its needs through the earlier of
the consummation of a Business Combination or one year from this filing. Over this time period, the Company will be using these funds
for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due
diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and
structuring, negotiating and consummating the Business Combination.
Note
2 — Significant Accounting Policies
Basis
of Presentation
The
accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally
accepted in the United States of America (“US GAAP”) for interim financial information and certain information or footnote
disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted, pursuant to
the rules and regulations of the SEC for interim financial reporting in accordance with the instructions to Form 10-Q and Article 10
of Regulation S-X of the SEC. Accordingly, they do not include all of the information and footnotes required by US GAAP. In the opinion
of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments
necessary for the fair statement of the balances and results for the periods presented. Operating results for the period for the three
and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected through December 31, 2021.
The
accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto
included in the Form 8-K, the final prospectus, and the audited financial statements and notes thereto included in the Form 10-K filed
by the Company with the SEC on January 26, 2021, January 20, 2021, and April 15, 2021, respectively.
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (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 auditor 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 these unaudited condensed financial statements in conformity with US GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited
condensed financial statements. Actual results could differ from those estimates.
Cash
and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company did not have any cash equivalents as of June 30, 2021 and December 31, 2020.
Marketable
Securities Held in Trust Account
At
June 30, 2021, the assets held in the Trust Account were held in treasury funds. All of the Company’s investments held in the
Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end
of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are included
in interest income in the accompanying condensed statement of operations. The estimated fair values of investments held in Trust
Account are determined using available market information.
The
carrying value and fair value of marketable securities held in Trust Account on June 30, 2021 are as follows:
|
|
Carrying
Value
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair Value
as of
June 30,
2021
|
|
Marketable securities held in Trust Account
|
|
$
|
258,756,914
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
258,756,914
|
|
|
|
$
|
258,756,914
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
258,756,914
|
|
Fair
Value Measurements
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 balance sheet, primarily due to their short-term
nature. Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly
transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes
the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
|
●
|
Level 1,
defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
|
|
●
|
Level 2,
defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices
for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
|
|
●
|
Level 3,
defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions,
such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
|
In
some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In
those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input
that is significant to the fair value measurement.
The
fair value of the Company’s certain assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value
Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet. The fair values of cash and
cash equivalents, prepaid expenses, accounts payable and accrued expenses, and due to related party are estimated to approximate the
carrying values as of June 30, 2021 due to the short maturities of such instruments.
The
fair value of the Private Placement Warrants is based on a Monte Carlo valuation model utilizing management judgment and pricing inputs
from observable and unobservable markets with less volume and transaction frequency than active markets. Significant deviations from
these estimates and inputs could result in a material change in fair value. The fair value of the Private Placement Warrants is classified
as Level 3. See Note 6 for additional information on assets and liabilities measured at fair value.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution,
which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. At June 30, 2021 and December 31, 2020, the Company
has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
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 Accounting Standards
Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory
redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable Class A common stock
(including 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 feature certain redemption
rights that is considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly,
Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’
equity section of the Company’s balance sheet.
Net
Income (Loss) Per Common Share
Net
income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common stock outstanding for
each of the periods.
The
Company’s condensed statements of operations include a presentation of income per share for Class A common stock subject
to possible redemption in a manner similar to the two-class method of income (loss) per common share. Net income per common share, basic
and diluted, for redeemable Class A common stock is calculated by dividing the interest income earned on the Trust Account (less any
amounts utilized for taxes), by the weighted average number of Class A redeemable common stock outstanding since original issuance. Net
loss per common share, basic and diluted, Class B and non-redeemable Class A common stock is calculated by dividing the net loss, adjusted
for income attributable to Class A redeemable common stock, by the weighted average number of Class B and non-redeemable Class A common
stock outstanding for the periods. Class B 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
calculation of diluted net loss per common share does not consider the effect of the warrants issued in connection with the (i) IPO,
(ii) exercise of overallotment option granted in connection with the IPO and (iii) Private Placement since the exercise price of the
warrants is higher than the market price.
|
|
For the
Three Months
Ended
June 30,
2021
|
|
|
For the
Six Months
Ended
June 30,
2021
|
|
Class A common stock subject to possible redemption
|
|
|
|
|
|
|
Numerator: net income allocable to Class A common stock subject to possible redemption
|
|
|
|
|
|
|
Interest income on marketable securities held in trust
|
|
$
|
3,484
|
|
|
$
|
6,124
|
|
Less: interest available to be withdrawn for payment of taxes
|
|
|
(3,484
|
)
|
|
|
(6,124
|
)
|
Net income allocable to Class A common stock subject to possible redemption
|
|
$
|
-
|
|
|
$
|
-
|
|
Denominator: Weighted average redeemable Class A common stock
|
|
|
|
|
|
|
|
|
Redeemable Class A common stock, basic and diluted
|
|
|
23,328,999
|
|
|
|
20,602,577
|
|
Basic and diluted net income per share, redeemable Class A common stock
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non-redeemable common stock
|
|
|
|
|
|
|
|
|
Numerator: net loss minus redeemable net earnings
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(4,077,527
|
)
|
|
$
|
(851,286
|
)
|
Redeemable net earnings
|
|
|
-
|
|
|
|
-
|
|
Non-redeemable net loss
|
|
$
|
(4,077,527
|
)
|
|
$
|
(851,286
|
)
|
Denominator: Weighted average non-redeemable common stock
|
|
|
9,014,751
|
|
|
|
8,788,825
|
|
Basic and diluted net loss per share, non-redeemable common stock
|
|
$
|
(0.45
|
)
|
|
$
|
(0.10
|
)
|
Offering
Costs associated with the Initial Public Offering
The
Company complies with the requirements of the ASC 340-10-S99 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A - “Expenses
of Offering”. Offering costs consist principally of underwriting fees and professional and registration fees incurred through the
balance sheet date.
FASB
ASC 470-20, Debt with Conversion and Other Options addresses the allocation of proceeds from the issuance of convertible debt into its
equity and debt components. The Company applies this guidance to allocate IPO proceeds from the Units between Class A common stock and
warrants, using the residual method by allocating IPO proceeds first to fair value of the warrants and then the Class A common stock.
The
Company incurred offering costs amounting to $14,668,643 as a result of the Initial Public Offering consisting of a $5,175,000 underwriting
discount, $9,056,250 of deferred underwriting discount, and $437,393 of other offering costs. The Company recorded $14,052,969 of offering
costs as a reduction of equity in connection with the Class A common stock included in the Units. The Company immediately expensed $615,674
of offering costs in connection with the Warrants that were classified as liabilities.
Derivative
Financial Instruments
The
Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded
derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are recorded at fair value
on the grant date and re-valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative
assets and liabilities are classified on the balance sheet as current or non-current based on whether or not net-cash settlement or conversion
of the instrument could be required within 12 months of the balance sheet date.
The
Company accounted for the 20,112,500 warrants issued in connection with the IPO and Private Placement in accordance with the guidance
contained in FASB ASC 815-40. Such guidance provides that, because the warrants do not meet the criteria for equity treatment
thereunder, each warrant must be recorded as a liability.
Income
Taxes
The
Company accounts for income taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax
assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities
and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation
allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC
740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes
a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected
to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination
by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim
period, disclosure and transition.
The
Company 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 June 30, 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 has identified the United States as its only “major” tax jurisdiction.
The
Company may be subject to potential examination by federal and state taxing authorities in the areas of income taxes. These potential
examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance
with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will
materially change over the next twelve months.
Risks
and Uncertainties
Management
continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could
have a negative effect on the Company’s financial position, results of its operations, cash flows and/or search for a target company,
the specific impact is not readily determinable as of the date of the condensed financial statements. The condensed financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
Recent
Accounting Pronouncements
Management
does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect
on the Company’s unaudited condensed financial statement.
Note
3 — Initial Public Offering
Pursuant
to the IPO on January 20, 2021, the Company sold 25,875,000 Units, including 3,375,000 Units pursuant to the exercise of the underwriters’
over-allotment option in full, at a purchase price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and one-half
warrant to purchase one share of Class A common stock (“Public Warrant”). Each Public Warrant entitles the holder to purchase
one share of Class A common stock at a price of $11.50 per share, subject to adjustment. Each Public Warrant will become exercisable
on the later of 30 days after the completion of the initial Business Combination or 12 months from the closing of the IPO and will expire
five years after the completion of the initial Business Combination, or earlier upon redemption or liquidation.
Following
the closing of the IPO on January 20, 2021, $258,750,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the IPO
and the sale of the Private Placement Warrants was placed in a Trust Account, which may only be invested in United States “government
securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money
market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S.
government treasury obligations.
Public
Warrants
Each
whole warrant entitles the holder to purchase one share of the Company’s Class A common stock at a price of $11.50 per share, subject
to adjustment as discussed herein. In addition, if (x) the Company issues additional shares of its Class A common stock or equity-linked
securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective
issue price of less than $9.20 per share of the Company’s 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 Company’s initial stockholders or such affiliates, as applicable, prior
to such issuance (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60%
of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the
completion of the initial Business Combination (net of redemptions), and (z) the volume-weighted average trading price of the Company’s
Class A common stock during the 20 trading day period starting on the trading day prior to the day on which the Company completes its
initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants
will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $10.00
and $18.00 per share redemption trigger prices described adjacent to “Redemption of warrants when the price per share of the Company’s
Class A common stock equals or exceeds $18.00” and “Redemption of warrants when the price per share of the Company’s
Class A common stock equals or exceeds $10.00” will be adjusted (to the nearest cent) to be equal to 100% and 180% of the higher
of the Market Value and the Newly Issued Price, respectively.
The
warrants will become exercisable on the later of 12 months from the closing of the IPO or 30 days after the completion of its initial
Business Combination, and will expire five years after the completion of the Company’s initial Business Combination, at 5:00 p.m.,
New York City time, or earlier upon redemption or liquidation.
The
Company will not be obligated to deliver any 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 with respect to the shares of Class A common stock
underlying the warrants is then effective and a prospectus relating thereto is current. No warrant will be exercisable and the Company
will not be obligated to issue a share of Class A common stock upon exercise of a warrant unless the share of the Company’s 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. In no event will the Company be required to net cash settle any warrant.
In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant
will have paid the full purchase price for the unit solely for the share of Class A common stock underlying such unit.
Redemption
of Warrants When the Price per Share of Our Class A Common Stock Equals or Exceeds $18.00
Once
the warrants become exercisable, the Company may redeem the outstanding warrants:
|
●
|
in
whole and not in part;
|
|
●
|
at
a price of $0.01 per warrant;
|
|
●
|
upon
not less than 30 days’ prior written notice of redemption to each warrant holder; and
|
|
●
|
if,
and only if, the last reported sale price of the shares of the Company’s Class A common stock for any 20 trading days within
a 30-trading day period ending three business days before the Company sends to the notice of redemption to the warrant holders (the
“Reference Value”) equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like).
|
Redemption
of Warrants When the Price per Share of Our Class A Common Stock Equals or Exceeds $10.00
Once
the warrants become exercisable, the Company may redeem the outstanding warrants:
|
●
|
in
whole and not in part;
|
|
●
|
at
$0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption; provided that holders will be able to exercise
their warrants on a cashless basis prior to redemption and receive that number of shares determined based on the redemption date
and the “fair market value” of the Class A common stock (as defined below);
|
|
●
|
if,
and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, rights issuances,
subdivisions, reorganizations, recapitalizations and the like); and
|
|
●
|
if the Reference Value is less than $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, rights issuances, subdivisions, recapitalizations and the like), the Private Placement Warrants must also concurrently be called for redemption on the same terms as the outstanding Public Warrants, as described above.
|
In
addition, if the Company’s Class A common stock are at the time of any exercise of a warrant not listed on a national securities
exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the
Company may, at its option, require holders of the Company’s public warrants who exercise their warrants to do so on a “cashless
basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company elects to do so, the Company will
not be required to file or maintain in effect a registration statement, but the Company will use its best efforts to register or qualify
the shares under applicable blue sky laws to the extent an exemption is not available. In such event, each holder would pay the exercise
price by surrendering each such warrant for that number of shares of the Company’s Class A common stock equal to the lesser of
(A) the quotient obtained by dividing (x) the product of the number of shares of the Company’s Class A common stock underlying
the warrants, multiplied the excess of the “fair market value” less the exercise price of the warrants by (y) the fair market
value and (B) 0.361. The “fair market value” shall mean the volume weighted average price of the shares of the Company’s
Class A common stock for the 10 trading days ending on the trading day prior to the date on which the notice of exercise is received
by the warrant agent.
Note
4 — Private Placement
Simultaneously
with the closing of the IPO, the Sponsor purchased an aggregate of 7,175,000 Private Placement Warrants at a price of $1.00 per Private
Placement Warrant, for an aggregate purchase price of $7,175,000, in a private placement (the “Private Placement”).
The
Private Placement Warrants are identical to the warrants sold as part of the Units in the IPO except that, so long as they are held by
the Sponsor or its permitted transferees, (i) they will not be redeemable by the Company, (ii) they (including the shares of the Company’s
Class A common stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned
or sold by the Sponsor until 30 days after the completion of the Company’s initial Business Combination, (iii) they may be exercised
by the holders on a cashless basis, and (iv) are subject to registration rights.
The
Private Placement Warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor or its
permitted transferees. If the Private Placement Warrants are held by holders other than the Sponsor or its permitted transferees, the
Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the warrants included
in the Units being sold in the IPO.
The
fair value of Private Placement Warrants on the issuance date was $6,169,744.
Note
5 — Related Party Transactions
Founder
Shares
On
October 2 2020, the Sponsor paid $25,000 to the Company in consideration for 6,468,750 shares of Class B common stock. The Founder Shares
include an aggregate of up to 843,750 shares subject to forfeiture if the over-allotment option is not exercised by the underwriters
in full. Because of the underwriters’ full exercise of the over-allotment option on January 20, 2021, 843,750 shares are no longer
subject to forfeiture.
The
Sponsor has agreed not to transfer, assign or sell any of its founder shares until the earliest of (A) one year after the completion
of the Company’s initial Business Combination or (B) subsequent to the Company’s initial Business Combination, (x) if the
last reported sale price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits,
stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing
at least 150 days after the Company’s initial Business Combination, or (y) the date on which the Company completes a liquidation,
merger, capital stock exchange or other similar transaction that results in all of its stockholders having the right to exchange their
common stock for cash, securities or other property.
Due
to Related Party
As
of June 30, 2021, the amount of due to related party consisted of $48,048 accrued for the administrative support services (defined below)
provided by the Sponsor and $3,069 travel expenses to be reimbursed to the related party. The balance of $56,560 as of December 31, 2020 consists of advances
from related parties of $28,330 and offering costs of $28,230 paid by a related party on behalf of the Company.
Promissory
Note — Related Party
On
September 22, 2020, the Company issued an unsecured promissory note to the Sponsor, pursuant to which the Company may borrow up to an
aggregate principal amount of $300,000 to be used for a portion of the expenses of the IPO. This loan is non-interest bearing, unsecured
and due at the earlier of June 30, 2021 or the closing of the IPO. The Company had drawn down $105,230 under the promissory note with
the Sponsor, and repaid the promissory note in full on January 29, 2021.
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 the working capital held outside
the Trust Account to repay the Working Capital Loans but no proceeds from the Trust Account would be used to repay the Working Capital
Loans. Up to $1,500,000 of such Working Capital Loans may be convertible into warrants at a price of $1.00 per warrant at the option
of the lender. The warrants would be identical to the Private Placement Warrants. At June 30, 2021 and December 31, 2020, no such Working
Capital Loans were outstanding.
Administrative
Service Fee
The
Company has agreed to pay its Sponsor, commencing on the date of the consummation of the IPO, a total of $10,000 per month for office
space and administrative support services. Upon completion of the Company’s Business Combination or its liquidation, the Company
will cease paying these monthly fees. The amount of the administrative service fee for the three and six months ended June 30, 2021 was
$30,000 and $53,548, respectively.
Note
6 — Fair Value Measurements
The
following table presents information about the Company’s assets and liabilities that were measured at fair value on a recurring
basis as of June 30, 2021, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such
fair value.
|
|
June 30,
|
|
|
Quoted
Prices In
Active
Markets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Other
Unobservable
Inputs
|
|
|
|
2021
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities held in Trust Account
|
|
$
|
258,756,914
|
|
|
$
|
258,756,914
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
$
|
258,756,914
|
|
|
$
|
258,756,914
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant Liability – Public Warrants
|
|
$
|
10,220,625
|
|
|
$
|
10,220,625
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Warrant Liability – Private Placement Warrants
|
|
|
6,337,778
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,337,778
|
|
|
|
$
|
16,558,403
|
|
|
$
|
10,220,625
|
|
|
$
|
-
|
|
|
$
|
6,337,778
|
|
Initial
Measurement
The
estimated fair value of the the Warrants on January 20, 2021 is determined using Level 3 inputs. Inherent in a Monte-Carlo simulation
model are assumptions related to expected stock-price volatility (pre-merger and post-merger), expected term, dividend yield
and risk-free interest rate. The Company estimates the volatility of its common stock based on management’s understanding of the
volatility associated with instruments of other similar entities. The risk-free interest rate is based on the U.S. Treasury Constant
Maturity similar to the expected remaining life of the warrants. The expected life of the warrants is simulated based on management assumptions
regarding the timing and likelihood of completing a business combination. The dividend rate is based on the historical rate, which the
Company anticipates to remain at zero. The assumptions used in calculating the estimated fair values represent the Company’s best
estimate. However, inherent uncertainties are involved. If factors or assumptions change, the estimated fair values could be materially
different.
The
key inputs into the Monte Carlo simulation model for the Warrants were as follows at January 20, 2021:
Input
|
|
January 20,
2021
|
|
Expected term (years)
|
|
|
6.36
|
|
Expected volatility
|
|
|
14.30
|
%
|
Risk-free interest rate
|
|
|
0.67
|
%
|
Stock price
|
|
$
|
9.59
|
|
Dividend yield
|
|
|
0.00
|
%
|
Exercise price
|
|
$
|
11.50
|
|
Subsequent
Measurement
The
fair value of the Public Warrants at June 30, 2021 is classified as Level 1 due to the use of an observable market quote in an active
market. As of June 30, 2021, the aggregate value of Public Warrants was $10,220,625.
The
estimated fair value of the Private Placement Warrants on June 30, 2021 is determined using Level 3 inputs. Inherent in a Monte-Carlo
simulation model are assumptions related to expected stock-price volatility (pre-merger and post-merger), expected term, dividend
yield and risk-free interest rate. The Company estimates the volatility of its common stock based on management’s understanding
of the volatility associated with instruments of other similar entities. The risk-free interest rate is based on the U.S. Treasury Constant
Maturity similar to the expected remaining life of the warrants. The expected life of the warrants is simulated based on management assumptions
regarding the timing and likelihood of completing a business combination. The dividend rate is based on the historical rate, which the
Company anticipates to remain at zero. The assumptions used in calculating the estimated fair values represent the Company’s best
estimate. However, inherent uncertainties are involved. If factors or assumptions change, the estimated fair values could be materially
different.
The
key inputs into the Monte Carlo simulation model for the Private Placement Warrants were as follows at June 30, 2021:
Input
|
|
June 30,
2021
|
|
Expected term (years)
|
|
|
5.92
|
|
Expected volatility
|
|
|
14.30
|
%
|
Risk-free interest rate
|
|
|
1.03
|
%
|
Stock price
|
|
$
|
9.69
|
|
Dividend yield
|
|
|
0.00
|
%
|
Exercise price
|
|
$
|
11.50
|
|
The
following table sets forth a summary of the changes in the fair value of the Level 3 warrant liability for the six months ended June
30, 2021:
|
|
Warrant
Liability
|
|
Fair value as of December 31, 2020
|
|
$
|
-
|
|
Initial fair value of warrant liability upon issuance at IPO
|
|
|
16,830,433
|
|
Transfer out of Level 3 to Level 1
|
|
|
(8,021,250
|
)
|
Change in fair value
|
|
|
(2,471,405
|
)
|
|
|
|
|
|
Fair value as of June 30, 2021
|
|
$
|
6,337,778
|
|
Note
7 — Commitments and Contingencies
Registration
Rights
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) will be entitled to registration rights pursuant to a registration rights agreement signed on January 14, 2021.
The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company registers such
securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements
filed subsequent to the Company’s completion of its initial Business Combination.
Underwriters
Agreement
The
underwriters had a 45-day option beginning January 20, 2021 to purchase up to an additional 3,375,000 Units to cover over-allotments,
if any.
On
January 20, 2021, the underwriters fully exercised the over-allotment option to purchase 3,375,000 Units, and paid a fixed underwriting
discount in aggregate of $5,175,000. Additionally, the underwriters will be entitled to a deferred underwriting discount of 3.5% of the
gross proceeds of the IPO, or $9,056,250, held in the Trust Account upon the completion of the Company’s initial Business Combination
subject to the terms of the underwriting agreement.
Note
8 — Stockholder’s Equity
Preferred
Stock — The Company is authorized to issue a total of 1,000,000 preferred shares at par value of $0.0001 each. At
June 30, 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 a total of 200,000,000 Class A
common shares at par value of $0.0001 each. As of June 30, 2021, there were 2,953,753 shares of Class A common stock issued and outstanding,
excluding 22,921,247 shares of Class A common stock subject to possible redemption.
Class
B Common Stock — The Company is authorized to issue a total of 20,000,000 Class B common shares at par value of $0.0001
each. On October 2, 2020, the Company issued 6,468,750 Class B common shares to its initial stockholders for $25,000, or approximately
$0.004 per share. The Founder Shares included an aggregate of up to 843,750 shares subject to forfeiture if the over-allotment option
was not exercised by the underwriters in full. Because of the underwriters’ fully exercise of the over-allotment option on January
20, 2021, 843,750 shares are no longer subject to forfeiture. As of June 30, 2021, there were 6,468,750 Class B common shares issued
and outstanding.
The
Company’s initial stockholders have agreed not to transfer, assign or sell any of their founder shares until the earlier to occur
of (A) one year after the completion of the Company’s initial Business Combination or (B) subsequent to the Company’s initial
Business Combination, (x) if the last reported sale price of the shares of the Company’s 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 the Company’s initial Business Combination, or (y) the
date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of
its stockholders having the right to exchange their common stock for cash, securities or other property.
The
shares of Class B common stock will automatically convert into shares of the Company’s Class A common stock upon the completion
of the Company’s initial Business Combination at a ratio such that the number of shares of the Company’s Class A common stock
issuable upon conversion of all founder shares will equal, in the aggregate, on an as-converted basis, 20% of the sum of (i) the total
number of shares of the Company’s common stock issued and outstanding upon completion of the IPO, plus (ii) the sum of (a) the
total number of shares of the Company’s common stock issued or deemed issued or issuable upon conversion or exercise of any equity-linked
securities (as defined herein) or deemed issued by the Company in connection with or in relation to the completion of the initial Business
Combination, excluding (1) any shares of the Company’s Class A common stock or equity-linked securities exercisable for or convertible
into shares of the Company’s Class A common stock issued, or to be issued, to any seller in the initial Business Combination, and
(2) any Private Placement Warrants issued to the Sponsor or any of its affiliates upon conversion of Working Capital Loans, minus (b)
the number of public shares redeemed by public stockholders in connection with the Company’s initial Business Combination. In no
event will the shares of the Company’s Class B common stock convert into shares of the Company’s Class A common stock at
a rate of less than one to one.
With
respect to any other matter submitted to a vote of the Company’s stockholders, including any vote in connection with the initial
Business Combination, except as required by law, holders of the Company’s founder shares and holders of the Company’s public
shares will vote together as a single class, with each share entitling the holder to one vote.
Note
9 — Subsequent Events
The
Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed
financial statements were issued. The Company did not identify any subsequent events that would have required adjustment or disclosure
in the unaudited condensed financial statements.
ITEM 2. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References to the “Company,” “us,”
“our” or “we” refer to Class Acceleration Corp. The following discussion and analysis of our financial condition
and results of operations should be read in conjunction with our unaudited condensed financial statements and related notes included herein.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical
fact included in this Report including, without limitation, statements under this “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans
and objectives of management for future operations, are forward- looking statements. When used in this Report, words such as “anticipate,”
“believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us
or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management,
as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially
from those contemplated by the forward- looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent
written or oral forward-looking statements attributable to us or persons acting on the Company’s behalf are qualified in their entirety
by this paragraph.
The following discussion and analysis of our financial
condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto
contained elsewhere in this Report. Certain information contained in the discussion and analysis set forth below includes forward-looking
statements that involve risks and uncertainties.
Overview
We are an early-stage blank check company incorporated
in Delaware on August 24, 2020 under the name “Class Acquisition Corporation,” whose business purpose is to effect an initial
business combination. On November 16, 2020, we changed our name to “Class Acceleration Corp.”
Our management team has extensive experience with
acquisitions and consummating business combinations. Led by Michael Moe, our Chief Executive Officer, our management team’s shared
vision is owning and building a market-dominant and agile education technology business. Private technology companies are changing the
world at an unprecedented pace by establishing new markets, creating new experiences and disrupting legacy industries. This is happening
at an accelerated pace in the digital learning industry, driven by the knowledge economy and most recently by COVID-19. We seek to acquire
a digital learning leader that benefits from the dual tailwinds of the knowledge economy and the Internet. Digital economics reflect a
disproportionate gain to the leaders of a category. Accordingly, we seek leading companies who we believe have both competitive and sustainable
advantages. We believe our management team’s significant operating and transaction experience and relationships will continue to
provide us with a substantial number of potential initial business combination targets.
The underlying growth fundamentals in the digital
learning industry has attracted substantial venture and growth capital over the past 10 years. In 2019, $7 billion was invested in private
digital learning companies versus only $500 million in 2010, a 14x increase in nearly a decade. Moreover, globally there are currently
approximately 30 privately held digital learning companies with valuations in excess of $1 billion, where none existed only five years
ago. Our management team has been investing in the digital learning market for over 10 years, which is why we believe we will be able
to identify and source several targets that will meet our stringent acquisition criteria.
Our efforts to identify a prospective initial
business combination target are not limited to a particular industry, sector or geographic region. While we may pursue an initial business
combination opportunity in any industry or sector, since our initial public offering, we have capitalized on the ability of our management
team to identify, acquire and operate a business or businesses that can benefit from our management team’s established global relationships
and operating experience. Our management team has extensive experience in identifying and executing strategic investments globally and
has done so successfully in a number of sectors, including media and entertainment.
Results of Operations
Our entire activity since inception up to June
30, 2021 relates to our formation, the Initial Public Offering and, since the closing of the Initial Public Offering, a search for a Business
Combination candidate. We will not be generating any operating revenues until the closing and completion of our initial Business Combination,
at the earliest.
For the three months ended June 30, 2021, we had net loss of $4,077,527,
which consisted of $292,250 in formation and operating costs and $3,789,264 in unrealized loss on change in fair value of warrants, offset
by $3,933 in interest earned on marketable securities held in the Trust Account and $54 in interest earned on operating bank account.
For the six months ended June 30, 2021, we had net loss of $851,286, which
consisted of $514,610 in formation and operating costs and $615,674 in transaction costs in connection with IPO, offset by $6,914 in interest
earned on marketable securities held in the Trust Account, $54 in interest earned on operating bank account, and $272,030 in unrealized
gain on change in fair value of warrants.
Liquidity and Capital Resources
As of June 30, 2021, we had approximately $0.9
million in our operating bank account, approximately $258.8 million in our Trust Account, and working capital of approximately $0.9 million.
Except with respect to interest earned on the
funds held in the Trust Account that may be released to us to pay our taxes, if any, the funds held in the Trust Account will not be released
until the earliest to occur of (a) the completion of the initial Business Combination, (b) the redemption of any public shares properly
tendered in connection with a stockholder vote to amend our second amended and restated certificate of incorporation, and (c) the redemption
of all of our public shares if we have not completed the initial Business Combination within 24 months from the closing of IPO, subject
to applicable law. The proceeds deposited in the Trust Account could become subject to the claims of our creditors, if any, which could
have priority over the claims of our public stockholders.
The following table provides a summary of our
net cash flows from operating, investing, and financing activities for the six months ended June 30, 2021.
Net cash used in operating activities
|
|
$
|
(788,204
|
)
|
Net cash used in investing activities
|
|
|
(258,750,000
|
)
|
Net cash provided by financing activities
|
|
|
260,323,457
|
|
Net change in cash
|
|
|
785,253
|
|
Cash, beginning of the period
|
|
|
76,602
|
|
Cash, end of the period
|
|
$
|
861,855
|
|
Prior to the completion of the Initial Public
Offering, our liquidity needs had been satisfied through a payment from the Sponsor of $25,000 for the founder shares, the loan under
an unsecured promissory note from the Sponsor of $105,230, and advances from related party of $100. We fully paid the note to the Sponsor
and the related party advances on January 29, 2021.
On January 20, 2021, we consummated the IPO of
25,875,000 Units, including 3,375,000 Units pursuant to the exercise of the underwriters’ over-allotment option in full at $10.00
per Unit, generating gross proceeds of $258,750,000. Simultaneously with the closing of the IPO, we consummated the sale of 7,175,000
Private Placement Warrants at a price of $1.00 per Private Placement Warrant in a private placement to the Sponsor, generating total gross
proceeds of $7,175,000.
Subsequent to the consummation of the Initial
Public Offering and Private Placement, our liquidity needs have been satisfied through the proceeds from the consummation of the Private
Placement not held in the Trust Account.
In addition, in order to finance transaction costs
in connection with a Business Combination, our Sponsor or an affiliate of the Sponsor or certain of our officers and directors may, but
are not obligated to, provide us Working Capital Loans. To date, there were no amounts outstanding under any Working Capital Loans.
Based on the foregoing, management believes that
we will have sufficient working capital and borrowing capacity to meet our needs through the earlier of the consummation of a Business
Combination or one year from this filing. Over this time period, we will be using these funds for paying existing accounts payable, identifying
and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying
for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business
Combination.
Critical Accounting Policies and Estimates
The preparation of the unaudited condensed financial
statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the
reported amounts of expenses during the reporting period. Actual results could differ from those estimates. We have identified the following
as our critical accounting policies:
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 Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing
Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) is classified as a liability instrument
and is measured at fair value. Conditionally redeemable Class A common stock (including 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 feature certain redemption rights that is considered to be outside of the Company’s control
and subject to the occurrence of uncertain future events. Accordingly, Class A common stock subject to possible redemption is presented
at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed
by dividing net income (loss) by the weighted average number of common stock outstanding for each of the periods.
The Company’s condensed statements of operations
include a presentation of income per share for Class A common stock subject to possible redemption in a manner similar to the two-class
method of income (loss) per common share. Net income per common share, basic and diluted, for redeemable Class A common stock is calculated
by dividing the interest income earned on the Trust Account (less any amounts utilized for taxes), by the weighted average number of Class
A redeemable common stock outstanding since original issuance. Net loss per common share, basic and diluted, for Class B and non-redeemable
Class A common stock is calculated by dividing the net loss, adjusted for income attributable to Class A redeemable common stock, by the
weighted average number of Class B and non-redeemable Class A common stock outstanding for the periods. Class B 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 calculation of diluted net income (loss) per
common share does not consider the effect of the warrants issued in connection with the (i) IPO, (ii) exercise of overallotment option
granted in connection with the IPO and (iii) Private Placement since the exercise price of the warrants is higher than the market price.
Warrant Liabilities
The Company evaluates its financial instruments
to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic
815, “Derivatives and Hedging”. We account for the Public and Private Placement warrants (collectively “Warrants”),
as either equity or liability classified instruments based on an assessment of the specific terms of the Warrants and the applicable authoritative
guidance. The assessment considers whether the Warrants meet all of the requirements for equity classification under ASC 815, including
whether the warrants are indexed to our own stock and whether the warrant holders could potentially require “net cash settlement”
in a circumstance outside of our control.
Derivative instruments are recorded at fair value
on the grant date and re-valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative
assets and liabilities are classified on the balance sheet as current or non-current based on whether or not net-cash settlement or conversion
of the instrument could be required within 12 months of the balance sheet date.
The Company accounted for the 20,112,500 warrants
issued in connection with the IPO and Private Placement in accordance with the guidance contained in FASB ASC 815-40. Such guidance
provides that, because the warrants do not meet the criteria for equity treatment thereunder, each warrant must be recorded as a liability.
Off-Balance Sheet Arrangements
As of June 30, 2021, we did not have any off-balance
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
Recent Accounting Pronouncements
We do not believe that any recently issued, but
not effective, accounting standards, if currently adopted, would have a material effect on our unaudited condensed financial statement.
Contractual Obligations
Administrative Service Fee
We have agreed to pay our Sponsor, commencing
on the date of the consummation of the IPO, a total of $10,000 per month for office space and administrative support services. Upon completion
of the Business Combination or liquidation, we will cease paying these monthly fees.
Underwriters Agreement
The underwriters will be entitled to a deferred
underwriting discount of 3.5% of the gross proceeds of the IPO, or $9,056,250, held in the Trust Account upon the completion of the initial
Business Combination subject to the terms of the underwriting agreement.