Notes to Condensed Financial Statements
(unaudited)
NOTE 1 – DESCRIPTION OF ORGANIZATION AND BUSINESS
OPERATIONS
Organization and General:
Hennessy Capital Investment Corp. V (the “Company”)
was incorporated in Delaware on October 6, 2020 as Hennessy Capital Acquisition Corp. V and changed its name to Hennessy Capital Investment
Corp. V on November 19, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition,
stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the
“Securities Act,” as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
At September 30, 2021, the Company had not commenced
any operations. All activity for the period from October 6, 2020 (inception) to September 30, 2021 relates to the Company’s formation
and the initial public offering (“Public Offering”) described below and, subsequent to the Public Offering, identifying and
completing a suitable Business Combination. The Company will not generate any operating revenues until after completion of its initial
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 Public Offering. The Company has selected December 31 as its fiscal year end.
All dollar amounts are rounded to the nearest
thousand dollars.
Sponsor and Financing:
The Company’s sponsor is Hennessy Capital
Partners V LLC, a Delaware limited liability company (the “Sponsor”). The Company intends to finance a Business Combination
with proceeds from the $345,000,000 Public Offering (Note 4) and a $10,400,000 private placement (Note 5). Upon the closing of the Public
Offering and the private placement, $345,000,000 was placed in a trust account (the “Trust Account”).
The Trust Account:
The funds in the Trust Account are invested only
in U.S. government treasury bills with a maturity of one hundred and eighty-five (185) days or less or in money market funds meeting certain
conditions under Rule 2a-7 under the Investment Company Act of 1940 which invest only in direct U.S. government obligations. Funds
will remain in the Trust Account until the earlier of (i) the consummation of the initial Business Combination or (ii) the distribution
of the Trust Account as described below. The remaining funds outside the Trust Account may be used to pay for business, legal and accounting
due diligence on prospective acquisition targets and continuing general and administrative expenses.
The Company’s amended and restated certificate
of incorporation provides that, other than the withdrawal of interest to pay tax obligations, if any (less up to $100,000 of interest
to pay dissolution expenses), none of the funds held in trust will be released 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 Company’s obligation
to redeem 100% of the public shares if the Company does not complete the initial Business Combination within 24 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
24 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 creditors, if any, which could have priority over the claims of our public stockholders.
Business Combination:
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the Public Offering and the sale of the Private Placement Warrants, although
substantially all of the net proceeds of the Public Offering are intended to be generally applied toward consummating a Business Combination
with (or acquisition of) a Target Business. As used herein, “Target Business” is one or more target businesses that together
have a fair market value equal to at least 80% of the balance in the Trust Account (less the deferred underwriting commissions and taxes
payable on interest earned) at the time of signing a definitive agreement in connection with the Company’s initial Business Combination.
There is no assurance that the Company will be able to successfully effect a Business Combination.
The Company, after signing a definitive agreement
for a Business Combination, will either (i) seek stockholder approval of the Business Combination at a meeting called for such purpose
in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or against the Business Combination,
for cash equal to their pro rata share of 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 but less taxes payable, or (ii) provide stockholders with the
opportunity to have their shares redeemed by the Company by means of a tender offer (and thereby avoid the need for a stockholder vote)
for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days
prior to commencement of the tender offer, including interest but less taxes payable. The decision as to whether the Company will seek
stockholder approval of the Business Combination or will allow stockholders to sell their shares in 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 otherwise require the Company to seek stockholder approval unless a vote is required by the rules of the Nasdaq
Capital Market. If the Company seeks stockholder approval, it will complete its Business Combination only if a majority of the outstanding
shares of Class A and Class B common stock voted are voted in favor of the Business Combination. However, in no event will the
Company redeem its public shares in an amount that would cause its net tangible assets to be less than $5,000,001 upon consummation of
a Business Combination. In such case, the Company would not proceed with the redemption of its public shares and the related Business
Combination, and instead may search for an alternate Business Combination.
If the Company holds a stockholder vote or there
is a tender offer for shares in connection with a Business Combination, a public stockholder will have the right to redeem its shares
for an amount in cash equal to its pro rata share of 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 but less taxes payable. As a result, such shares of
Class A common stock are recorded at redemption amount and classified as temporary equity upon the completion of the Public Offering,
in accordance with FASB ASC 480, “Distinguishing Liabilities from Equity.” The amount in the Trust Account was initially $10.00
per public common share ($345,000,000 held in the Trust Account divided by 34,500,000 public shares).
The Company will only have 24 months from the
closing date of the Public Offering, or until January 20, 2023, to complete its initial Business Combination. If the Company does not
complete a Business Combination within this period of time, it shall (i) cease all operations except for the purposes of winding
up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the public shares of Class A
common stock for a per share pro rata portion of the Trust Account, including interest, but less taxes payable (less up to $100,000 of
such net interest to pay dissolution expenses) and (iii) as promptly as possible following such redemption, dissolve and liquidate
the balance of the Company’s net assets to its creditors and remaining stockholders, as part of its plan of dissolution and liquidation.
The initial stockholders have waived their rights to participate in any redemption with respect to their Founder Shares (as defined in
Note 5); however, if the initial stockholders or any of the Company’s officers, directors or affiliates acquire shares of Class A
common stock after the Public Offering, they will be entitled to a pro rata share of the Trust Account upon the Company’s redemption
or liquidation in the event the Company does not complete a Business Combination within 24 months from the closing of the Public Offering.
In the event of such distribution, it is possible
that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than
the price per Unit in the Public Offering.
NOTE 2 – TERMINATION OF MERGER AGREEMENT AND PLAN OF REORGANIZATION
As previously disclosed, on May 7, 2021, Hennessy
Capital Investment Corp. V (“HCIC”) entered into a Merger Agreement and Plan of Reorganization (as amended and restated
on June 19, 2021, the “Merger Agreement”) with PlusAI Corp, an exempted company incorporated with limited liability
in the Cayman Islands (“Plus”), Plus Inc., an exempted company incorporated with limited liability in the Cayman Islands
(“PubCo”), Prime Merger Sub I, Inc., an exempted company incorporated with limited liability in the Cayman Islands
and a direct, wholly-owned subsidiary of PubCo, Prime Merger Sub II, Inc., a Delaware corporation and wholly-owned subsidiary of PubCo,
and Plus Holdings Ltd., an exempted company incorporated with limited liability in the Cayman Islands and wholly-owned subsidiary of Plus,
to effect HCIC’s initial business combination with Plus. In light of recent developments in the regulatory environment outside of
the United States, Plus is pursuing a potential restructuring of certain aspects of its business. Subsequent to September 30, 2021 and
given the November 8, 2021 “outside date” set forth in the Merger Agreement, HCIC and Plus have mutually agreed to terminate
the Merger Agreement effective as of November 8, 2021.
HCIC and Plus may enter into discussions
with respect to a potential new business combination transaction following any such restructuring, though they are under no obligation
to do so and there can be no assurance that any such discussions would result in the parties reaching a definitive agreement with respect
to a potential new business combination.
Neither party will be required to pay the other
a termination fee as a result of the mutual decision to terminate the Merger Agreement.
Plus is a global provider of self-driving truck technology aimed at
making trucks safer, more efficient, more comfortable, and better for the environment using its autonomous driving solution PlusDrive
advanced sensing technologies, including radar, lidar, and cameras to provide a 360-degree sensing system. Plus plans to begin mass production
of PlusDrive, starting in 2021 with FAW, a heavy-truck manufacturer. Plus is headquartered in Cupertino, California.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation:
The accompanying unaudited condensed interim financial
statements of the Company are presented in U.S. dollars and in conformity with accounting principles generally accepted in the United
States of America (“GAAP”) pursuant to the rules and regulations of the SEC and reflect all adjustments, consisting only of
normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position as
of September 30, 2021, and the results of operations and cash flows for the periods presented. Certain information and disclosures normally
included in financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. Interim results
are not necessarily indicative of results for a full year.
The accompanying unaudited condensed interim financial
statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s
final prospectus dated January 14, 2021.
Liquidity and Capital Resources:
At September 30, 2021, the Company has approximately
$1,015,000 in cash, approximately $7,238,000 of current liabilities and approximately $6,005,000 in negative working capital. The Company
has incurred and expects to continue to incur significant costs in pursuit of its Business Combination. These conditions raise substantial
doubt about the Company’s ability to continue as a going concern for a period of time within one year after the date that the financial
statements are issued. There is no assurance that the Company’s plans to consummate a Business Combination will be successful or successful
within the period permitted to complete the Business Combination. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Emerging Growth Company:
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 an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means
that when an accounting 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.
Net Income (Loss) Per Common Share:
Net income (loss) per common share is computed
by dividing net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding during the
period as calculated using the treasury stock method. The Company has not considered the effect of the warrants sold in the Public Offering
and the Private Placement to purchase an aggregate of 15,558,333 shares of Class A common stock in the calculation of diluted income (loss)
per share, since their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted income (loss) per common
share is the same as basic loss per common share for the period.
The Company complies with the accounting and disclosure requirements
of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of stock, which are referred too as Class A common
stock and Class B common stock. Income and losses are shared pro rata between the two classes of stock. Net income (loss) per common share
is calculated by dividing the net income (loss) by the weighted average number of ordinary shares out standing during the respective period.
The following table reflects the earnings per share after allocating
income between the shares based on outstanding shares.
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For the three months ended
September 30, 2021
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For the nine months ended
September 30, 2021
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Class A
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Class B
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Class A
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Class B
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Numerator:
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Allocation of net income (loss)
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9,312,800
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2,328,200
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(3,547,232
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)
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(947,768
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)
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Denominator:
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Weighted average shares outstanding
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34,500,000
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8,625,000
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31,972,527
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8,542,582
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Basic and diluted net income (loss) per share
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$
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0.27
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$
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0.27
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$
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(0.11
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)
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$
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(0.11
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)
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Concentration of Credit Risk:
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of cash accounts in a financial institution which, at times, may exceed the Federal
Deposit Insurance Corporation maximum 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.
Financial Instruments:
The fair value of the Company’s assets and
liabilities (excluding the warrant liability), which qualify as financial instruments under FASB Accounting Standards Codification (“ASC”)
820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the condensed financial statements
primarily due to their short-term nature.
Use of Estimates:
The preparation of condensed financial statements
in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the
reported amounts of expenses during the reporting period.
Making estimates requires management to exercise
significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances
that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near
term due to one or more future confirming events. One of the more significant estimates included in these financial statements is the
determination of the fair value of the warrant liability. Such estimates may be subject to change as more current information becomes
available and accordingly the actual results could differ significantly from those estimates.
Deferred Offering Costs:
The Company complies with the requirements of
the FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A — “Expenses of Offering.” Costs incurred
in connection with preparation for the Public Offering were approximately $19,689,000, including the underwriters discount of $18,975,000.
Such costs were allocated among the equity and warrant liability components based on their fair values and approximately $19,050,000 of
such costs have been charged to equity and the remainder, approximately $639,000, have been charged to the condensed statement of operations
upon completion of the Public Offering in January 2021.
Income Taxes:
The Company follows the asset and liability method
of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for
the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances
are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
The Company’s currently taxable income consists
of interest income on the Trust Account net of taxes. The Company’s general and administrative costs are generally considered start-up
costs and are not currently deductible. During the three and nine months ended September 30, 2021, and December 31, 2020 the Company recorded
income tax expense of approximately $-0- in both periods because the cost of deductible franchise taxes exceeded the interest income earned
on the Trust Account so there was no income for tax purposes. The Company’s effective tax rate for the three and nine months ended
September 30, 2021 was approximately -0-% in both periods which differs from the expected income tax rate due to the start-up costs (discussed
above) which are not currently deductible and business combination and warrant costs which may not be deductible. At September 30, 2021
and December 31, 2020, the Company has a deferred tax asset of approximately $300,000 and $-0-, respectively, primarily related to start-up
costs. Management has determined that a full valuation allowance of the deferred tax asset is appropriate at this time.
FASB ASC 740 prescribes a recognition threshold
and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in
a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing
authorities. There were no unrecognized tax benefits as of September 30, 2021. The Company recognizes accrued interest and penalties related
to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties at September 30,
2021 and December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals
or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
Redeemable Common Stock:
As discussed in Note 4, all of the 34,500,000 public shares sold as
part of Units in the Public Offering contain a redemption feature which allows for the redemption of public shares if the Company holds
a stockholder vote or there is a tender offer for shares in connection with a Business Combination. In accordance with FASB ASC 480, redemption
provisions not solely within the control of the Company require the security to be classified outside of permanent equity. Ordinary liquidation
events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions
of FASB ASC 480. Although the Company did not specify a maximum redemption threshold, its charter provides that in no event will it redeem
its public shares in an amount that would cause its net tangible assets to be less than $5,000,001 upon the closing of a Business Combination.
However, because all of the shares of Class A common stock are redeemable, all of the shares are recorded as Class A common stock subject
to redemption on the enclosed balance sheet. See also, Note 7, regarding a revision to the presentation of redeemable shares in these
financial statements and the effect on previously reported financial statements.
The Company recognizes changes in redemption value
immediately as they occur and adjusts the carrying value of the securities at the end of each reporting period. Increases or decreases
in the carrying amount of redeemable common stock are affected by adjustments to additional paid-in capital. Accordingly, at September
30, 2021, 34,500,000 of the 34,500,000 public shares were classified outside of permanent equity. At December 31, 2020, there were no
shares of Class A common stock outstanding or redeemable.
Warrant Liability
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
FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC
815”). The assessment considers 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 shares, among other conditions for equity classification. This assessment,
which requires the use of professional judgment, is conducted at the time of 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 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. Changes in the estimated fair
value of the warrants are recognized as a non-cash gain or loss on the statements of operations. Costs associated with issuing the warrants
accounted for as liabilities are charged to operations when the warrants are issued. The fair value of the warrants was estimated in the
initial periods using a Monte Carlo simulation approach for the public and private warrants and in the current period based upon, or derived
from, the public trading warrants in an active, open market.
Recent Accounting Pronouncements:
In August 2020, the FASB issued 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 evaluating the impact that the pronouncement will have
on the financial statements.
Management does not believe that any other recently
issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial
statements.
Subsequent Events:
Management has evaluated subsequent events and
transactions that occurred after the balance sheet date and up to the date that the financial statements were issued and has concluded
that all such events that would require adjustment or disclosure have been recognized or disclosed.
NOTE 4 – PUBLIC OFFERING
On January 20, 2021, the Company completed the
sale of 34,500,000 units at a price of $10.00 per unit (the “Units”). Each Unit consists of one share of the Company’s
Class A common stock, $0.0001 par value and one-fourth of one redeemable warrant (the “Warrants”). Each whole Warrant
offered in the Public Offering is exercisable to purchase one share of Class A common stock at $11.50 per share. Under the terms
of a warrant agreement, the Company has agreed to use its best efforts to file a new registration statement under the Securities Act,
following the completion of the Company’s initial Business Combination. No fractional Warrants will be issued upon separation of
the Units and only whole Warrants will trade. Accordingly, unless a holder owns a multiple of four Units, the number of Warrants issuable
to such holder upon separation of the Units will be rounded down to the nearest whole number of Warrants. Each Warrant will become exercisable
on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Public Offering;
provided in each case that the Company has an effective registration statement under the Securities Act covering the shares of Class A
common stock issuable upon exercise of the Warrants and a current prospectus relating to them is available (or the Company permits holders
to exercise their Warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). 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 and have an effective registration statement covering the shares of Class A
common stock issuable upon exercise of the Warrants and to maintain a current prospectus relating to those shares of Class A common
stock until the Warrants expire or are redeemed. If a registration statement covering the Class A common stock issuable upon exercise
of the Warrants is not effective by the 60th business day after the closing of the initial Business Combination, warrant holders
may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain
an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the
Securities Act or another exemption. Notwithstanding the above, if the Company’s shares of 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 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 so elects, it will not be required to file or maintain in effect a registration statement, and in the event the Company does
not so elect, it will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption
is not available.
The warrants have an exercise price of $11.50
per share, subject to adjustments, and will expire five years after the completion of a Business Combination or earlier upon redemption
or liquidation. In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities
for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price
of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith
by the board of directors and, in the case of any such issuance to the Sponsor or its affiliates or any anchor investors, without taking
into account any founder shares or warrants held by our initial stockholders or such affiliates, as applicable, or our anchor investors,
prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more
than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date
of the consummation of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of
Class A common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates
its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants
will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, the $18.00 per
share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly
Issued Price, and the $10.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to the higher of the
Market Value and the Newly Issued Price.
Redemption of warrants when the price per share
of Class A common stock equals or exceeds $18.00. Once the Warrants become exercisable, the Company may redeem the outstanding
warrants for cash (except as described herein with respect to the Private Placement Warrants):
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in whole and not in part;
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at a price of $0.01 per Warrant;
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upon a minimum of 30 days’ prior written notice of redemption; and
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if, and only if, the closing price of Class A 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 “Reference Value”).
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Redemption of warrants when the price per share
of Class A common stock equals or exceeds $10.00. Once the warrants become exercisable, the Company may
redeem the outstanding warrants (except as described with respect to the Private Placement Warrants):
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in whole and not in part;
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at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to an agreed table based on the redemption date and the fair market value of the shares of Class A common stock; and
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if, and only if, the closing price of the shares of Class A common stock equals or exceeds $10.00 per public share (as adjusted) on the trading day prior to the date on which the Company sends the notice of redemption to the warrant holders;
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if the Reference Value is less than $18.00 per share (as adjusted for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like), then the Private Placement Warrants must also concurrently be called for redemption on the same terms (except as described herein with respect to a holder’s ability to cashless exercise its warrants) as the outstanding Warrants.
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In no event will the Company be required to net
cash settle any warrant. If the Company is unable to complete a Business Combination by January 20, 2023, and the Company liquidates the
funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they
receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly,
the warrants may expire worthless.
The Company granted the underwriters a 45-day
option to purchase up to 4,500,000 additional Units to cover any over-allotments, at the Public Offering price less the underwriting discounts
and commissions. The underwriters exercised their over-allotment option in full. The Warrants that were issued in connection with the
4,500,000 over-allotment units are identical to the public Warrants and have no net cash settlement provisions.
The Company paid an underwriting discount of 2.0%
of the per Unit price to the underwriters at the closing of the Public Offering, or $6,900,000, with an additional fee (the “Deferred
Discount”) of 3.5%, or $12,075,000, of the gross offering proceeds is payable upon the consummation of the initial Business Combination.
The Deferred Discount will become payable to the underwriters from the amounts held in the Trust Account solely in the event the Company
completes its initial Business Combination.
The Company intends to finance a Business Combination
with proceeds from the $345,000,000 Public Offering and a $10,400,000 private placement (Note 5), net of expenses of the offering and
amounts allocated to working capital. Upon the closing of the Public Offering and the private placement, net proceeds of $345,000,000
were placed in the Trust Account.
NOTE 5 – RELATED PARTY TRANSACTIONS
Founder Shares
In October 2020 the Sponsor purchased 7,187,500
shares of Class B common stock (the “Founder Shares”) for $25,000, or approximately $0.003 per share (up to 937,500 of
which were subject to forfeiture to the extent the underwriters’ over-allotment option was not exercised in full). In January 2021,
the Sponsor transferred an aggregate of 1,450,000, Founder Shares to the Company’s officers, directors and advisors. The Founder
Shares are identical to the Class A common stock included in the Units being sold in the Public Offering except that the Founder
Shares automatically convert into shares of Class A common stock at the time of the initial Business Combination and are subject
to certain transfer restrictions, as described in more detail below. In January 2021, the Company effected a stock dividend of 0.2 shares
for each share of Class B common stock, resulting in the Company’s initial stockholders holding an aggregate of 8,625,000 Founder
Shares. Certain of the transferees of the initial stockholders (discussed above) then transferred an aggregate of 290,000 shares back
to the Sponsor. The January 2021 stock dividend is retroactively restated in the accompanying financial statements at December 31, 2020.
The Sponsor had agreed to forfeit up to 1,125,000 Founder Shares to the extent that the over-allotment option was not exercised in full
by the underwriters. The over-allotment option was exercised in full and therefore no shares were forfeited and this contingency has lapsed.
The Company’s initial stockholders have
agreed not to transfer, assign or sell any of their Founder Shares until the earlier of (A) one year after the completion of the
Company’s initial Business Combination, or (B), subsequent to the Company’s initial Business Combination, if (x) 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 dividends, 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, stock exchange or other similar transaction after the initial Business Combination that results in all of the Company’s
stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Private Placement Warrants
The Sponsor and certain funds and accounts managed
by subsidiaries of BlackRock, Inc. and D. E. Shaw Valence Portfolios, L.L.C. (collectively, the “Direct Anchor Investors”)
purchased from the Company an aggregate of 6,933,333 warrants at a price of $1.50 per warrant (a purchase price of $10,400,000), in a
private placement that occurred simultaneously with the completion of the Public Offering (the “Private Placement Warrants”).
The Sponsor purchased 4,853,333 Private Placement Warrants and the Direct Anchor Investors purchased 2,080,000 Private Placement Warrants.
Each Private Placement Warrant entitles the holder to purchase one share of Class A common stock at $11.50 per share. A portion of
the purchase price of the Private Placement Warrants was added to the proceeds from the Public Offering held in the Trust Account pending
completion of the Company’s initial Business Combination. The Private Placement Warrants (including the Class A common stock
issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable until 30 days after the
completion of the initial Business Combination and they will be non-redeemable so long as they are held by the Sponsor, the Direct Anchor
Investors or their permitted transferees. If the Private Placement Warrants are held by someone other than the Sponsor, the Direct Anchor
Investors or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders
on the same basis as the warrants included in the Units being sold in the Public Offering. Otherwise, the Private Placement Warrants have
terms and provisions that are identical to those of the Warrants being sold as part of the Units in the Public Offering and have no net
cash settlement provisions.
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 its initial Business
Combination at a newly issued 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 Company’s board of directors and, in the case of any such issuance to its initial stockholders or
their affiliates or any anchor investors, without taking into account any founder shares or warrants held by our initial stockholders
or such affiliates, as applicable, or our anchor investors, 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.
If the Company does not complete a Business Combination,
then the proceeds from the sale of the Private Placement Warrants will be part of the liquidating distribution to the public stockholders
and the Private Placement Warrants issued to the Sponsor and the Direct Anchor Investors will expire worthless.
Registration Rights
The Company’s initial stockholders and the
holders of the Private Placement Warrants are entitled to registration rights pursuant to a registration rights agreement signed on the
date of the prospectus for the Public Offering. These holders are entitled to make up to three demands, excluding short form registration
demands, that the Company register such securities for sale under the Securities Act. In addition, these holders have “piggy-back”
registration rights to include their securities in other registration statements filed by the Company. The Company will bear the expenses
incurred in connection with the filing of any such registration statements. There will be no penalties associated with delays in registering
the securities under the registration rights agreement.
Related Party Loans
In October 2020, the Sponsor agreed to loan
the Company an aggregate of $500,000 by drawdowns of not less than $10,000 each against the issuance of an unsecured promissory note (the
“Note”) to cover expenses related to the Public Offering. In December 2020, the Company borrowed approximately $150,000 under
the Note in order to fund a portion of the costs of the Public Offering. The Note was non-interest bearing and payable on the earlier
of June 30, 2021 or the completion of the Public Offering. The Note was repaid in full at the January 20, 2021 closing of the Public Offering
and no amounts are outstanding under the Note at September 30, 2021. Because the Note was payable on the earlier of September 30, 2021
or the completion of the Public Offering and both the date and the event (the completion of the Public Offering) have passed, this Note
is no longer available to the Company.
Administrative Support Agreement
The Company has agreed to pay $15,000 a month
for office space, utilities and secretarial and administrative support to an affiliate of the Sponsor, Hennessy Capital Group LLC. Services
commenced on the date the securities were first listed on the Nasdaq Capital Market and will terminate upon the earlier of the consummation
by the Company of an initial Business Combination or the liquidation of the Company. Approximately $45,000 and 128,000, respectively,
was charged to general and administrative expenses in the three and nine months ended September 30, 2021.
Also, commencing on the date the securities were
first listed on the Nasdaq Capital Market, the Company agreed to compensate each of its President and Chief Operating Officer as well
as its Chief Financial Officer $29,000 per month prior to the consummation of the Company’s initial Business Combination, of which
$14,000 per month is payable upon the completion of the Company’s initial Business Combination and $15,000 per month is payable
currently for their services. During the three and nine months ended September 30, 2021, $90,000 and $256,000, respectively, was paid
and $239,000 was included in accrued deferred compensation at September 30, 2021 for these obligations.
NOTE 6 – TRUST ACCOUNT AND FAIR VALUE MEASUREMENT
The Company complies with FASB ASC 820, Fair Value
Measurements, 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.
Upon the closing of the Public Offering and the
Private Placement, a total of $345,000,000 was deposited into the Trust Account. The proceeds in the Trust Account may be invested in
either U.S. government treasury bills 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 of 1940, as amended, and that invest solely in U.S. government treasury obligations.
At September 30, 2021, the proceeds of the Trust
Account were invested primarily in money market funds meeting certain conditions described above yielding interest of less than 0.1% per
year. The Company classifies its U.S. government treasury bills and equivalent securities as held-to-maturity in accordance with FASB
ASC 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 U.S. government treasury bills are recorded at amortized cost on the
accompanying September 30, 2021 condensed balance sheet and adjusted for the amortization of discounts.
The following table presents information about
the Company’s assets that are measured at fair value on a recurring basis as of September 30, 2021 and indicates the fair value
hierarchy of the valuation techniques the Company utilized to determine such fair value. Since all of the Company’s permitted investments
at September 30, 2021 consisted of U.S. government treasury bills and money market funds that invest only in U.S. government treasury
bills, fair values of its investments are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical
assets or liabilities as follows:
Description
|
|
Carrying value at
September 30,
2021
|
|
|
Gross
Unrealized
Holding
Gains
|
|
|
Quoted Price
Prices in
Active Markets
(Level 1)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
345,032,000
|
|
|
$
|
-
|
|
|
$
|
345,032,000
|
|
There were no assets held in the Trust Account at December 31, 2020.
NOTE 7 – REVISION of PREVIOUSLY ISSUED FINANCIAL STATEMENTS
Class A Common Stock Subject to Redemption
In September 2021, the Chief Accountant of the Securities and Exchange
Commission determined that the form of redemption agreement utilized by most Special Purpose Acquisition Companies (“SPAC”),
including the Company, calls for all of the Class A common stock to be redeemable and that, therefore, all such shares should be accounted
for as redeemable in such companies’ financial statements. Previously, most SPAC’s, including the Company, accounted for all
but the amount necessary to have $5,000,001 of stockholders’ equity, as redeemable since the Company would not enter a transaction
that would cause its stockholders’ equity to be below the $5,000,001 threshold.
As a result of the above, the Company has recorded all outstanding
Class A common stock as Class A ordinary shares subject to redemption in the September 30, 2021 condensed balance sheet. The effect of
this change on the Company’s previously issued financial statements is as follows:
|
|
As Previously
|
|
|
Adjustment
|
|
|
As Revised
|
|
Balance Sheet at January 20, 2021
|
|
|
|
|
|
|
|
|
|
Class A ordinary shares subject to possible redemption
|
|
|
305,587,000
|
|
|
|
39,413,000
|
|
|
|
345,000,000
|
|
Additional paid-in-capital
|
|
|
5,043,000
|
|
|
|
(5,043,000
|
)
|
|
|
-
|
|
Accumulated deficit
|
|
|
(44,000
|
)
|
|
|
(32,999,000
|
)
|
|
|
(33,043,000
|
)
|
Total shareholders’ equity
|
|
|
5,000,000
|
|
|
|
(38,042,000
|
)
|
|
|
(33,042,000
|
)
|
Balance Sheet at March 31, 2021
|
|
|
|
|
|
|
|
|
|
Class A ordinary shares subject to possible redemption
|
|
|
304,564,000
|
|
|
|
40,436,000
|
|
|
|
345,000,000
|
|
Additional paid-in-capital
|
|
|
7,437,000
|
|
|
|
(7,437,000
|
)
|
|
|
-
|
|
Accumulated deficit
|
|
|
(2,438,000
|
)
|
|
|
(32,999,000
|
)
|
|
|
(35,437,000
|
)
|
Total shareholders’ equity
|
|
|
5,000,000
|
|
|
|
(30,437,000
|
)
|
|
|
(35,436,000
|
)
|
Balance Sheet at June 30, 2021
|
|
|
|
|
|
|
|
|
|
Class A ordinary shares subject to possible redemption
|
|
|
290,863,000
|
|
|
|
54,137,000
|
|
|
|
345,000,000
|
|
Additional paid-in-capital
|
|
|
21,138,000
|
|
|
|
(21,138,000
|
)
|
|
|
-
|
|
Accumulated deficit
|
|
|
(16,139,000
|
)
|
|
|
(32,999,000
|
)
|
|
|
(49,138,000
|
)
|
Total shareholders’ equity
|
|
|
5,000,000
|
|
|
|
(54,137,000
|
)
|
|
|
(49,137,000
|
)
|
The Company’s accounting for all of the Class A common stock
as redeemable instead of including a portion in stockholders’ equity did not have any effect on the Company’s previously reported
operating expenses, cash flows or cash.
NOTE 8 – ACCOUNTING FOR WARRANT LIABILITY, FAIR VALUE MEASUREMENT
At September 30, 2021, there were 15,558,333 warrants
outstanding including 8,625,000 Public Warrants and 6,933,333 Private Placement Warrants.
The Company accounts for its warrants outstanding
consistent with the “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition
Companies” (the “Staff Statement”) issued on April 12, 2021 by the staff (the “Staff”) of the Division of
Corporation Finance of the SEC. The Staff Statement, among other things, highlights the potential accounting implications of certain terms
that are common in warrants issued in connection with the initial public offerings of special purpose acquisition companies (“SPAC”)
such as the Company. The Staff Statement reflects the Staff’s view that in many cases, warrants issued by SPACs should be characterized
as liabilities for accounting purposes, rather than as equity securities, unless certain conditions are met. As a result of this guidance,
the Company’s management further evaluated its warrants under ASC Subtopic 815-40, Contracts in Entity’s Own Equity, including
the assistance of accounting and valuation consultants and concluded that the Company’s warrants are not indexed to the Company’s
shares in the manner contemplated by ASC Section 815-40-15 because the holder of the instrument is not an input into the pricing of a
fixed-for-fixed option on equity shares.
The Company has recorded approximately $1,471,000
of costs to the statement of operations at inception of the warrants to reflect (i) approximately $639,000 of warrant issuance costs and
(ii) an approximately $832,000 charge for costs associated with the issuance of the private placement warrants to the Sponsor for the
difference between the price paid for the warrants and the fair value at that date.
The following table presents information about
the Company’s warrant liabilities that are measured at fair value on a recurring basis at September 30, 2021 and indicates the fair
value hierarchy of the valuation inputs the Company utilized to determine such fair value.
Description
|
|
September 30,
2021
|
|
|
Quoted
Prices
in Active
Markets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Other
Unobservable
Inputs
(Level 3)
|
|
Warrant Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Public Warrants
|
|
$
|
10,781,000
|
|
|
$
|
10,781,000
|
|
|
$
|
—
|
|
|
$
|
-
|
|
Private Placement Warrants
|
|
$
|
8,667,000
|
|
|
$
|
—
|
|
|
$
|
8,667,000
|
|
|
$
|
-
|
|
Warrant liability at September 30, 2021
|
|
$
|
19,448,000
|
|
|
$
|
10,781,000
|
|
|
$
|
8,667,000
|
|
|
$
|
-
|
|
At September 30, 2021, the Company valued its
Public Warrants based on publicly observable inputs (Level 1 inputs) from the trading in the Public Warrants ($1.25 per warrant on September
30, 2021). Since the Private Placement Warrants are substantially similar to the Public Warrants but do not trade, the Company valued
them based on the value of the Public Warrants (significant other observable inputs – Level 2). The changes in fair value are recognized
in the statements of operations.
Prior to September 30, 2021, the Company utilized
an independent valuation consultant that used a Monte Carlo simulation model with Geometric Brownian motion to value the warrants at each
reporting period, with changes in fair value recognized in the statement of operations. The estimated fair value of the warrant liability
was determined using Level 3 inputs. Inherent in a Monte Carlo simulation options pricing model are assumptions related to expected
share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimated the volatility of its shares
based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S.
Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The
expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical
rate, which the Company anticipated to remain at zero. During the three months ended September 30, 2021, the Company transferred the Public
Warrants from Level 3 to Level 1 and the Private Placement Warrants from Level 3 to Level 2.
The warrant liabilities are not subject to qualified
hedge accounting.
The following table provides quantitative information
regarding Level 3 fair value measurements used prior to September 30, 2021:
|
|
At
June 30,
2021
|
|
|
At
January 20,
2021
(Initial
Measurement)
|
|
Stock price
|
|
$
|
10.11
|
|
|
$
|
10.00
|
|
Strike price
|
|
$
|
11.50
|
|
|
$
|
11.50
|
|
Term (in years)
|
|
|
5.0
|
|
|
|
5.0
|
|
Volatility
|
|
|
30
|
%
|
|
|
30
|
%
|
Risk-free rate
|
|
|
0.91
|
%
|
|
|
0.62
|
%
|
Probability of acquisition
|
|
|
95
|
%
|
|
|
75
|
%
|
Fair value of warrants
|
|
$
|
2.10
|
|
|
$
|
1.62
|
|
The following table presents the changes in the
fair value of warrant liabilities:
|
|
Public
|
|
|
Private
Placement
|
|
|
Warrant
Liabilities
|
|
Fair value at January 1, 2021
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Initial measurement on January 20, 2021
|
|
$
|
13,973,000
|
|
|
$
|
11,232,000
|
|
|
$
|
25,205,000
|
|
Change in valuation inputs or other assumptions
|
|
|
(346,000
|
)
|
|
|
(277,000
|
)
|
|
|
(623,000
|
)
|
Fair value as of March 31, 2021
|
|
$
|
13,627,000
|
|
|
$
|
10,955,000
|
|
|
$
|
24,582,000
|
|
Change in valuation inputs or other assumptions
|
|
|
4,485,000
|
|
|
|
3,605,000
|
|
|
|
8,090,000
|
|
Fair value at June 30, 2021
|
|
$
|
18,112,000
|
|
|
$
|
14,560,000
|
|
|
$
|
32,672,000
|
|
Change in valuation inputs or other assumptions
|
|
|
(7,331,000
|
)
|
|
|
(5,893,000
|
|
|
|
(13,224,000
|
)
|
Fair value as of September 30, 2021
|
|
$
|
10,781,000
|
|
|
$
|
8,667,000
|
|
|
$
|
19,448,000
|
|
None of the warrant liabilities are classified as level 3 in the fair value hierarchy at September 30, 2021.
NOTE 9 – STOCKHOLDERS’ EQUITY
Common Stock
The authorized common stock of the Company is
220,000,000 shares, including 200,000,000 shares of Class A common stock, par value, $0.0001, and 20,000,000 shares of Class B
common stock, par value, $0.0001. Upon completion of the Public Offering, the Company may (depending on the terms of the Business Combination)
be required to increase the authorized number of shares at the same time as its stockholders vote on the Business Combination to the extent
the Company seeks stockholder approval in connection with its Business Combination. Holders of the Company’s Class A and Class B
common stock vote together as a single class and are entitled to one vote for each share of Class A and Class B common
stock. At both September 30, 2021 and December 31, 2020, there were 8,625,000 shares of Class B common stock issued and outstanding
and -0- and -0- shares, respectively, of Class A common stock were issued and outstanding (excluding 34,500,000 and -0- shares, respectively,
subject to possible redemption at September 30, 2021 and December 31, 2020).
The 1,125,000 shares of Class B common stock which
were subject to forfeiture at December 31, 2020 (as described in Note 5) are no longer subject to forfeiture as the underwriters exercised
their over-allotment option in full in January 2021.
Preferred Stock
The Company is authorized to issue 1,000,000 shares
of preferred stock, par value $0.0001, with such designations, voting and other rights and preferences as may be determined from time
to time by the Company’s board of directors. At September 30, 2021 and December 31, 2020, there were no shares of preferred stock
issued or outstanding.
NOTE 10 – COMMITMENTS AND CONTINGENCIES
Business Combination Costs
In connection with identifying an initial Business
Combination candidate and negotiating an initial Business Combination, the Company has entered into, and expects to enter into additional,
engagement letters or agreements with various consultants, advisors, professionals and others. The services under these engagement letters
and agreements are material in amount and in some instances include contingent or success fees. Contingent or success fees (but not deferred
underwriting compensation) would be charged to operations in the quarter that an initial Business Combination is consummated. In most
instances (except with respect to our independent registered public accounting firm), these engagement letters and agreements are expected
to specifically provide that such counterparties waive their rights to seek repayment from the funds in the Trust Account.
Risks and Uncertainties – COVID-19
Management continues to evaluate the impact of
the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the pandemic could have an effect on
the Company’s financial position, results of its operations, and/or search for a target company and/or a target company’s
financial position and results of its operations, and the closing of a business combination, 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.