The accompanying notes are an integral part of
these unaudited condensed financial statements.
The accompanying
notes are an integral part of these unaudited condensed financial statements.
The accompanying
notes are an integral part of these unaudited condensed financial statements.
The accompanying notes are an integral part of
these unaudited condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 — Organization and Business Operations
Williams Rowland Acquisition Corp. is a newly
organized, blank check company incorporated as a Delaware corporation 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 has not selected any 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. The Company may pursue an initial business combination target
in any business or industry.
As of September 30, 2021, the Company had not
commenced any operations. All activity for the period from March 10, 2021 (inception) through September 30, 2021 relates to the Company’s
formation and the Initial Public Offering (“IPO” or “Public Offering”). The Company will not generate any operating
revenues until after the completion of its Business Combination, at the earliest. The Company will generate non-operating income
in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO. The Company has selected December
31 as its fiscal year end.
The Company’s sponsors are Williams Rowland
Sponsor LLC, a Delaware limited liability company and WRAC Ltd (collectively, the “Sponsors”). The registration statement
for the Company’s initial public offering was declared effective on July 26, 2021 (the “Effective Date”). On July 29,
2021, the Company consummated the initial public offering (the “Public Offering” or “IPO”) of 20,000,000 units
(the “Units”), at $10.00 per unit, generating gross proceeds of $200,000,000 (see Note 3). The underwriters exercised
their full over-allotment option to purchase an additional 3,000,000 on August 5, 2021.
Simultaneously with the closing of the IPO, the
Company consummated the sale of 9,900,000 warrants to the Sponsor (the “Private Placement Warrants”), at a price
of $1.00 per Private Placement Warrant, generating gross proceeds of $9,900,000 (see Note 4). Each Private Placement Warrant
is exercisable to purchase one share of Common stock at $11.50 per share. The Sponsor purchased an additional 1,200,000 Private
Placement Warrants as a result of the underwriters’ exercise of their full over-allotment option on August 5, 2021.
Transaction costs of the IPO and subsequent over-allotment
exercise amounted to $13,237,672, comprised of $4,600,000 of underwriting discount, $8,050,000 of deferred underwriting discount,
and $587,672 of other offering costs.
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 net balance in the Trust
Account (as defined below) (excluding the amount of deferred underwriting discounts held and taxes payable on the income earned on the
Trust Account) 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 of 1940, as amended (the “Investment Company Act”). There is no assurance that the
Company will be able to successfully effect a Business Combination.
Following the closing of the IPO on July 29, 2021,
and the subsequent full exercise of the underwriters’ over-allotment option on August 5, 2021, $236,500,000 (comprised of $205,900,000 from
the IPO and $30,600,000 from the over-allotment) from the net proceeds of the sale of the Units, including a portion of the proceeds
from the sale of the Private Placement Warrants, was deposited in a trust account (“Trust Account”), located in the United States
with Continental Stock Transfer & Trust Company acting as trustee. Of this amount, $1,900,000 was deposited into the Company’s
Operating Bank account on July 30, 2021, leaving $234,600,000 (approximately $10.20 per Unit) in the Trust Account. These funds
will be invested only in U.S. government securities with a maturity of 185 days or less or in money market funds meeting certain
conditions under Rule 2a-7 under the Investment Company Act 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 franchise
and income tax obligations (less up to $100,000 interest to pay dissolution expenses), the proceeds from the Public Offering and
the sale of the Private Placement Warrants will not be released from the Trust Account until the earliest of (a) the completion of
the initial Business Combination, (b) the redemption of any public shares properly submitted in connection with a stockholder vote
to amend the Company’s amended and restated certificate of incorporation (i) to modify the substance or timing of the ability
of holders of the public shares to seek redemption in connection with the initial Business Combination or the Company’s obligation
to redeem 100% of the public shares if the Company does not complete the initial Business Combination within 18 months from
the closing of the Public Offering or (ii) with respect to any other provision relating to stockholders’ rights or pre-Business Combination
activity, and (c) the redemption of the public shares if the Company is unable to complete the initial Business Combination within
18 months from the closing of the Public Offering, subject to applicable law. The proceeds deposited in the Trust Account could become
subject to the claims of the creditors, if any, which could have priority over the claims of the public stockholders.
The Company will provide its public stockholders
with the opportunity to redeem all or a portion of their public shares upon the completion of the initial Business Combination either
(i) in connection with a stockholder meeting called to approve the initial Business Combination or (ii) by means of a tender
offer. The decision as to whether the Company will seek stockholder approval of a proposed initial Business Combination or conduct a tender
offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction
and whether the terms of the transaction would require the Company to seek stockholder approval under the law or stock exchange listing
requirements. The Company will provide the public stockholders with the opportunity to redeem all or a portion of their public shares
upon the completion of the initial Business Combination at a per-share price, payable in cash, equal to the aggregate amount then
on deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest
earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes, divided by the number of then
outstanding public shares, subject to the limitations described herein.
The shares of common stock subject to redemption
are recorded at a redemption value and classified as temporary equity upon the completion of the Public Offering, in accordance with Financial
Accounting Standards Board’s (“FASB”) 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.
The Company will have only 18 months from
the closing of the Public Offering (the “Combination Period”) to complete the initial Business Combination. If the Company
is unable to complete the initial Business Combination within the initial Business Combination within such 18-month 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 subject to lawfully available funds therefor, 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 franchise and income taxes (less up to $100,000 of interest to pay
dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’
rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as
promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the
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 warrants, which will expire worthless if the Company fails to complete the initial Business Combination within the Combination
Period.
The initial stockholders, Sponsors, executive
officers and directors have entered into a letter agreement with the Company, pursuant to which they have agreed to (i) waive their
redemption rights with respect to any founder shares and public shares they hold in connection with the completion of the initial Business
Combination, (ii) waive their redemption rights with respect to any founder shares and public shares they hold in connection with
a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation (A) to modify
the substance or timing of the ability of holders of the public shares to seek redemption in connection with the initial Business Combination
or the Company’s obligation to redeem 100% of the public shares if the Company does not complete the initial Business Combination
within the Combination Period or (B) with respect to any other provision relating to stockholders’ rights or pre-initial Business
Combination activity and (iii) waive their rights to liquidating distributions from the Trust Account with respect to any founder
shares they hold if the Company fails to complete the initial Business Combination within the Combination Period, although they will be
entitled to liquidating distributions from the Trust Account with respect to any public shares they hold if the Company fails to complete
the initial Business Combination within the Combination Period.
The Sponsors have agreed that it will 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 entered into a written letter of intent, confidentiality or other similar agreement or Business
Combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.20 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 $10.20 per
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 the monies held in the Trust Account (whether
or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the IPO
against certain liabilities, including liabilities under the Securities Act. However, the Company has not asked the Sponsors to reserve
for such indemnification obligations, nor has the Company independently verified whether the Sponsors have sufficient funds to satisfy
its indemnity obligations and believe that the Sponsors’ only assets are securities of the Company. Therefore, the Company cannot
assure you that the Sponsors would be able to satisfy those obligations.
Liquidity and Capital Resources
As of September 30, 2021, the Company had
$488,491 in its operating bank account and working capital of $738,988.
The Company’s liquidity needs up to September
30, 2021 had been satisfied through a capital contribution from the Sponsor of $25,000 (see Note 5) for the founder shares and the
loan under an unsecured promissory note from the Sponsor of up to $600,000 (see Note 5). The promissory note from the Sponsor has
a balance outstanding as of September 30, 2021 of $25,000. 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 (see Note 5). To date, there were no amounts outstanding under
any Working Capital Loans.
On July 29, 2021, the Company consummated
the IPO of 20,000,000 Units, generating gross proceeds of $200,000,000 (see Note 3). Simultaneously with the closing of the IPO, the Company
consummated the sale of 9,900,000 warrants to the Sponsor (the “Private Placement Warrants”), at a price of $1.00 per Private
Placement Warrant, generating gross proceeds of $9,900,000 (see Notes 4). The underwriters exercised their full over-allotment option
to purchase an additional 3,000,000 on August 5, 2021. Following the IPO and exercise of the over-allotment and after the payment of transaction
fees, the Company had $234,600,000 in the Trust Account and $1,929,090 in the operating bank account.
Based on the foregoing, management believes that
the Company will have sufficient working capital and borrowing capacity 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.
Risks and Uncertainties
Management is currently evaluating 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 and/or search for a target company, the specific impact is not readily determinable
as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome
of this uncertainty.
Note 2 — Restatement of Previously Issued Financial Statements
The Company previously issued a balance
sheet dated July 29, 2021 in Form 8-K’s that were filed on August 4, 2021 and August 8, 2021. In those previously issued
balance sheets, a portion of the public shares were classified as permanent equity to maintain stockholders’ equity
greater than $5,000,000 on the basis that the Company will consummate its initial business combination only if the Company has net
tangible assets of at least $5,000,001. Thus, the Company can only complete a merger and continue to exist as a public company if
there is sufficient Public Shares that do not redeem at the merger and so it was determined then to be appropriate to classify the
portion of its public shares required to keep its stockholders’ equity above the $5,000,000 threshold as "shares not
subject to redemption."
However, in light of recent comment letters issued
by the Securities & Exchange Commission (“SEC”) to several special purpose acquisition companies, management re-evaluated
the Company’s application of ASC 480-10-99 to its accounting classification of public shares. Upon re-evaluation, management determined
that the public shares include certain provisions that require classification of the public shares as temporary equity regardless of the
minimum net tangible asset required by the Company to complete its initial Business Combination.
In accordance with SEC Staff Accounting Bulletin
No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements
when Quantifying Misstatements in Current Year Financial Statements;” the Company evaluated the changes and has determined that
the overall impacts were material to the previously presented balance sheets. Accordingly, the Company, in consultation with its
Audit Committee, concluded that its previously issued balance sheets should be restated to report all public shares as temporary
equity. As such, the Company is restating its previously issued balance sheet dated July 29, 2021 in this Quarterly Report.
Impact of the Restatement
The impact to the balance sheet as of July 29, 2021 is presented below:
|
|
As
Previously
Reported
|
|
|
Restatement
Adjustment
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet as of July 29, 2021
|
Common stock, $0.0001 par value; stock subject to possible redemption at redemption value of $10.20 per share
|
|
$
|
222,782,371
|
|
|
$
|
11,817,629
|
|
|
$
|
234,600,000
|
|
Stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock - $0.0001 par value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Common stock - $0.0001 par value
|
|
|
691
|
|
|
|
(116
|
)
|
|
|
575
|
|
Additional paid-in capital
|
|
|
5,104,266
|
|
|
|
(5,104,266
|
)
|
|
|
—
|
|
Accumulated deficit
|
|
|
(104,956
|
)
|
|
|
(6,713,247
|
)
|
|
|
(6,818,203
|
)
|
Total Stockholders’ Equity (Deficit)
|
|
$
|
5,000,001
|
|
|
$
|
(11,817,629
|
)
|
|
$
|
(6,817,628
|
)
|
Shares subject to possible redemption
|
|
|
21,841,409
|
|
|
|
1,158,591
|
|
|
|
23,000,000
|
|
Note 3 — 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 10 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 which contains the initial audited financial statements and
notes thereto for the period from March 10, 2021 (inception) to April 14, 2021 as filed with the SEC on July 28, 2021. The interim results
for the three months ended September 30, 2021 and for the period from March 10, 2021 (inception) through September 30, 2021 are not necessarily
indicative of the results to be expected for the year ending December 31, 2021 or for any future interim periods.
Emerging Growth Company Status
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 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 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 financial statements and the reported amounts of expenses during the reporting
period. 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 had $488,491 in cash and no
cash equivalents as of September 30, 2021.
Investment Held in Trust Account
At September 30, 2021, the assets held in the
Trust Account were held in U.S. Treasury Bills with a maturity of 185 days or less. During the period ended September 30, 2021, the Company
did not withdraw any of the interest income from the Trust Account to pay its tax obligations.
The Company classifies its United States Treasury
securities as held-to-maturity in accordance with FASB ASC Topic 320 “Investments - Debt and Equity Securities.” Held-to-maturity
securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities
are recorded at amortized cost and adjusted for the amortization or accretion of premiums or discounts.
A decline in the market value of held-to-maturity
securities below cost that is deemed to be other than temporary, results in an impairment that reduces the carrying costs to such securities’
fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment
is other than temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery
and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered
in this assessment includes the reasons for the impairment, the severity and the duration of the impairment, changes in value subsequent
to year-end, forecasted performance of the investee, and the general market condition in the geographic area or industry in which the
investee operates.
Premiums and discounts are amortized or accreted
over the life of the related held-to-maturity security as an adjustment to yield using the effective-interest method. Such amortization
and accretion are included in the “Trust interest income” line item in the statements of operations. Interest income is recognized
when earned.
Offering Costs Associated with Initial Public Offering
The Company complies with the requirements of
the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A—”Expenses of Offering”. Offering
costs consist of legal, accounting, underwriting and other costs incurred through the balance sheet date that are related to the IPO.
Offering costs amounted to $13,237,672, for the IPO and subsequent over-allotment, and were charged to stockholders’ equity upon
the completion of the IPO.
Fair Value of Financial Instruments
The fair value of the Company’s assets and
liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates
the carrying amounts represented in the balance sheet, primarily due to its short-term nature.
Fair Value Measurements
The Company follows the guidance in ASC 820 for
its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets
and liabilities that are re-measured and reported at fair value at least annually.
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 —
|
Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.
|
|
|
Level 2 —
|
Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means.
|
|
|
Level 3 —
|
Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
|
Warrants
The Company accounts for warrants as either equity-classified or
liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance
in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”).
The assessment considered whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability
pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether
the warrants are indexed to the Company’s own common shares and whether the warrant holders could potentially require “net
cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This
assessment, which requires the use of professional judgment, was conducted at the time warrant issuance and as of each subsequent quarterly
period end date while the warrants are outstanding.
For issued or modified warrants that meet all
of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital
at the time of issuance. For issued or modified warrants that do not meet all of the criteria for equity classification, the warrants
are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. The Company accounts
for its outstanding warrants as equity-classified.
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”. For derivative financial instruments that are accounted for as liabilities, the derivative
instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in
the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified
in 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.
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 common stock and warrants, using the residual method by allocating IPO proceeds
first to fair value of the warrants and then common stock.
Common Stock Subject to Possible Redemption
The Company accounts for its Common stock subject
to possible redemption in accordance with the guidance in FASB ASC Topic 480 “Distinguishing Liabilities from Equity.” Common
stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable
Common stock (including Common stock that features redemption rights that are either within the control of the holder or subject to redemption
upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other
times, Common stock is classified as Stockholders’ equity. The Company’s Common stock features certain redemption rights that
are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, 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.
Immediately upon the closing of the IPO, the Company
recognized the accretion from initial book value to redemption amount. Increases or decreases in the carrying amount of redeemable common
stock are affected by charges against additional paid-in capital and accumulated deficit.
As of September 30, 2021, the Common stock subject
to possible redemption reflected in the condensed balance sheet is reconciled in the following table:
Gross Proceeds from IPO
|
|
$
|
230,000,000
|
|
Proceeds from Private Placement used to overfund Trust
|
|
|
4,600,000
|
|
Less:
|
|
|
|
|
Issuance costs related to redeemable Common stock
|
|
|
(13,237,672
|
)
|
Plus:
|
|
|
|
|
Accretion of carrying value to redemption value
|
|
|
13,237,672
|
|
Common stock subject to possible redemption
|
|
$
|
234,600,000
|
|
Net Loss Per Common Share
The Company complies with the accounting and disclosure requirements
of FASB ASC Topic 260, “Earnings Per Share.” The Company applies the two-class method in calculating earnings per share. The
contractual formula utilized to calculate the redemption amount approximates fair value. The Class feature to redeem at fair value means
that there is effectively only one class of stock. Changes in fair value are not considered a dividend of the purposes of the numerator
in the earnings per share calculation. Net income per share of common stock is computed by dividing the pro rata net loss between the
shares of redeemable common stock and the shares of non-redeemable common stock by the weighted average number of shares of common stock
outstanding for each of the periods. The calculation of diluted income per share does not consider the effect of the warrants issued in
connection with the IPO since the exercise of the warrants is contingent upon the occurrence of future events and the inclusion of such
warrants would be anti-dilutive.
|
|
For the
Three Months ended
September 30,
2021
|
|
|
For the
Nine Months ended
September 30,
2021
|
|
Common stock subject to possible redemption
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
Net loss allocable to Common stock subject to possible redemption
|
|
$
|
(221,349
|
)
|
|
$
|
(224,129
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted Average Redeemable Common stock, Basic and Diluted
|
|
|
22,671,875
|
|
|
|
22,671,875
|
|
Basic and Diluted net loss per share, Redeemable Common stock
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
Non-Redeemable Common stock
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
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Net loss allocable to Common stock not subject to redemption
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|
$
|
(53,352
|
)
|
|
$
|
(51,243
|
)
|
Denominator:
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|
|
|
|
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Weighted Average Non-Redeemable Common stock, Basic and Diluted
|
|
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5,464,674
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|
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5,183,476
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|
Basic and diluted net loss per share, common stock
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$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
Income Taxes
The Company accounts for income taxes under FASB
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 September 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 is subject to income tax examinations
by major taxing authorities since inception. These 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.
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 coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company
is not exposed to significant risks on such accounts.
Recent Accounting Pronouncements
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 operations
or cash flows.
Note 4 — Initial Public Offering
Public Units
On July 29, 2021, the Company sold 20,000,000 Units
at a purchase price of $10.00 per Unit for aggregate proceeds of $200,000,000. On August 5, 2021, the underwriters exercised the
full over-allotment option, which resulted in the sale of an additional 3,000,000 Units and $30,000,000 in proceeds. This
resulted in aggregate Units sold of 23,000,000 and aggregate proceeds of $230,000,000 from the IPO and subsequent over-allotment.
Each Unit consists of one share of Common stock,
and one-half (1/2) of one warrant (“Public Warrant”). Each whole public warrant entitles the holder to purchase one share
of Common stock at an exercise price of $11.50 per share, subject to adjustment.
Note 5 — Private Placement
Simultaneously with the closing of the IPO on
July 29, 2021, the Sponsor purchased an aggregate of 9,900,000 Private Placement Warrants at a price of $1.00 per
Private Placement Warrant, for a purchase price of $9,900,000, in a private placement. In connection with the underwriters’ exercise
of their full over-allotment option on August 5, 2021, the Sponsors purchased an additional 1,200,000 Private Placement Warrants
for a purchase price of $1,200,000. This resulted in aggregate Private Placement Warrants of 11,100,000 sold for aggregate proceeds
of $11,100,000 from the IPO and subsequent over-allotment.
Each Private Placement Warrant entitles the
holder thereof to purchase one share of the Company’s Common stock at a price of $11.50 per share, subject to adjustment, and will
expire worthless if the Company does not complete the initial Business Combination. A portion of the proceeds from the private placement
was added to the proceeds from the IPO held in the Trust Account.
Note 6 — Related Party Transactions
Founder Shares
In April 2021, the Sponsors paid $25,000 in
exchange for 5,750,000 shares of common stock (the “founder shares”). The number of founder shares outstanding was
determined based on the expectation that the total size of the Public Offering would be a maximum of 23,000,000 Units if the
underwriter’s over-allotment option is exercised in full, and therefore that such founder shares would represent 20% of
the outstanding shares after the Public Offering. Up to 750,000 of the founder shares were subject to forfeiture depending on
the extent to which the underwriter’s over-allotment was exercised. The underwriters exercised their full over-allotment option
on August 5, 2021, thereby making the 750,000 shares no longer subject to forfeiture.
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 initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last reported sale price
of the common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations
and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business
Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction
that results in all of the stockholders having the right to exchange their shares of common stock for cash, securities or other property
(except as described herein under the section of this prospectus entitled “Principal Stockholders — Restrictions on Transfers
of Founder Shares and Private Placement Warrants”). Any permitted transferees will be subject to the same restrictions with respect
to any founder shares. (the “Lock-up”).
Promissory Note
The Sponsors have agreed to loan the Company up
to $600,000 to be used for a portion of the expenses of the Public Offering. These loans are non-interest bearing, unsecured
and due at the earlier of August 31, 2021 or the closing of the Public Offering. As of September 30, 2021, the Company had borrowed
$125,000 under the promissory note, of which $25,000 remains outstanding and is due on demand.
Working Capital Loans
In order to finance transaction costs in connection
with an intended initial Business Combination, the Sponsors, an affiliate of the Sponsors or certain of the Company’s officers and
directors may, but is not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). If the Company
completes an initial Business Combination, the Company would repay such loaned amounts out of the proceeds of the Trust Account released
to the Company. Otherwise, such loans would be repaid only out of funds held outside the Trust Account. In the event that the initial
Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay such
loaned amounts but no proceeds from the Trust Account would be used to repay such loaned amounts. Up to $1,000,000 of such loans may be
convertible into Private Placement Warrants of the post Business Combination entity, at a price of $1.00 per warrant at the option of
the lender. The warrants would be identical to the Private Placement Warrants issued to the Sponsors. As of September 30, 2021, no such
Working Capital Loans were outstanding.
Administrative Service Fee
The Company has entered into an administrative
services agreement pursuant to which the Company will pay an affiliate of the Sponsors a total of $10,000 per month for office space,
administrative and support services. Upon completion of the Company’s initial Business Combination or its liquidation, the Company
will cease paying these monthly fees. During the three months ended September 30, 2021 and the period from March 10, 2021 (inception)
through September 30, 2021, the Company recorded $21,935, of administrative service fees, which are included in formation and operating
costs in the accompanying unaudited condensed statements of operations.
Note 7 — Investments Held in Trust
Account
At September 30, 2021, the assets held in the
Trust Account were held in U.S. Treasury Bills with a maturity of 185 days or less. During the period ended September 30, 2021, the Company
did not withdraw any of the interest income from the Trust Account to pay its tax obligations.
The Company classifies its United States Treasury
securities as held-to-maturity in accordance with FASB ASC Topic 320 “Investments - Debt and Equity Securities.” Held-to-maturity
securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities
are recorded at amortized cost and adjusted for the amortization or accretion of premiums or discounts.
The carrying value, excluding gross unrealized
holding loss and fair value of held to maturity securities on September 30, 2021 are as follows:
|
|
Carrying
Value as of
September 30,
2021
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
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Fair Value
as of
September 30,
2021
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U.S. Treasury Securities
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$
|
234,612,589
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|
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$
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-
|
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$
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(13,785
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)
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$
|
234,598,804
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|
Cash held in Trust Account
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|
|
920
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|
|
|
-
|
|
|
|
-
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|
920
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|
|
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$
|
234,613,509
|
|
|
$
|
-
|
|
|
$
|
(13,785
|
)
|
|
$
|
234,599,724
|
|
Note 8 — 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 shares of 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 be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on the effective
date of the registration statement of which this prospectus forms a part, requiring the Company to register such securities for resale
(in the case of the founder shares, only after conversion to the common stock). The holders of these securities will be 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 the initial Business
Combination.
Underwriting Agreement
The Company granted the underwriter a 45-day option
to purchase up to 3,000,000 additional Units to cover any over-allotments, if any, at the Public Offering price less the underwriting
discounts and commissions. On August 5, 2021, the underwriter exercised the over-allotment option in full.
The underwriter was entitled to a cash underwriting
discount of two percent (2%) of the gross proceeds of the Public Offering, or $4,000,000. The underwriter exercised the full over-allotment
option on August 5, 2021 resulting in an additional $600,000 underwriting discount for an aggregate underwriting discount of $4,600,000 related
to the IPO and subsequent over-allotment exercise.
Additionally, the underwriter will be entitled
to a deferred underwriting discount of 3.5% of the gross proceeds of the Public Offering upon the completion of the Company’s
initial Business Combination.
Note 9 — 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. As of September 30, 2021, there were no shares of preferred stock issued or outstanding.
Common Stock
The Company is authorized to issue 100,000,000 shares of
Common stock with a par value of $0.0001 per share. Holders of the Common stock are entitled to one vote for each common stock. As
of September 30, 2021, there were 5,750,000 shares of Common stock issued and outstanding, of which 750,000 shares
were subject to forfeiture to the extent that the underwriter’s over-allotment option was not exercised in full so that the
founder shares will represent, on an as-converted basis, 20% of the Company’s issued and outstanding shares after the
IPO, excluding 23,000,000 shares subject to possible redemption. On August 5, 2021 the underwriters exercised their over-allotment option
in full, making the 750,000 founder shares no longer subject to forfeiture.
Warrants
Each whole warrant will entitle the holder to purchase one share of
the Company’s common stock at a price of $11.50 per share, subject to adjustment. In addition, if the Company issues additional
shares of common stock or equity-linked securities for capital raising purposes in connection with the closing of the initial Business
Combination at an issue price or effective issue price of less than $9.20 per share of common stock (with such issue price or effective
issue price to be determined in good faith by the board of directors and, in the case of any such issuance to the initial stockholders
or their affiliates, without taking into account any founder shares or private placement securities held by them, as applicable, prior
to such issuance) (the “newly issued price”), the exercise price of the warrants will be adjusted (to the nearest cent) to
be equal to 115% of the newly issued price.
The warrants will expire at 5:00 p.m., New York City time on the warrant
expiration date, which is five years after the completion of the initial Business Combination or earlier upon redemption or
liquidation. On the exercise of any warrant, the warrant exercise price will be paid directly to the Company and not placed in the Trust
Account.
The Company will not be obligated to deliver any shares of 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 common stock underlying the warrants is then effective and a prospectus relating thereto
is current, subject to the Company’s satisfying its obligations described below with respect to registration. No warrant will be
exercisable and the Company will not be obligated to issue shares of common stock upon exercise of a warrant unless 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 the event that the conditions in the two immediately preceding sentences are not satisfied with
respect to a warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and
expire worthless. 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 common stock underlying such Unit.
The Company is not registering the shares of common stock issuable
upon exercise of the warrants at this time. However, the Company has agreed that as soon as practicable, but in no event later than 15
business days after the closing of the initial Business Combination, the Company will use its best efforts to file with the SEC a registration
statement for the registration under the Securities Act of the shares of common stock issuable upon exercise of the warrants and thereafter
will use its best efforts to cause the same to become effective within 60 business days following the initial Business Combination and
to maintain a current prospectus relating to the common stock issuable upon exercise of the warrants, until the expiration of the warrants
in accordance with the provisions of the warrant agreement. If a registration statement covering the shares of common stock issuable upon
exercise of the warrants is not effective by the 60th business day after the closing of the initial Business Combination, warrant holders
may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain
an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities
Act or another exemption. 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
Once the warrants become exercisable, the Company
may redeem the outstanding warrants:
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in
whole and not in part;
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●
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at
a price of $0.01 per warrant;
|
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●
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upon
a minimum of 30 days’ prior written notice of redemption (the “30-day redemption period”); and
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|
●
|
if,
and only if, the last reported sale price of the common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the
third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.
|
The Private Placement Warrants are identical to the Public Warrants
sold as part of the units in the offering, subject to limited exceptions.
Note 10 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred
after the balance sheet date up to the date that the financial statements were issued. Based upon this review, other than as described
below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.