NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note
1—Description of Organization and Business Operations
D
and Z Media Acquisition Corp. (the “Company”) was incorporated in Delaware on October 7, 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”). Although the Company is not limited to a particular industry or
sector for purposes of consummating a Business Combination, the Company intends to focus its search for a target business in the media
and education technology (ed-tech) sectors. The Company is an emerging growth company and, as such, the Company is subject to all of
the risks associated with emerging growth companies.
As
of June 30, 2022 and December 31, 2021, the Company had not commenced any operations. All activity through June 30, 2022 relates to the
Company’s formation and the initial public offering (“IPO”) described below and since completion of the IPO, searching
for a target with which to consummate a Business Combination. The Company will not generate any operating revenues until after the completion
of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on
cash and cash equivalents from the proceeds derived from the IPO. The Company has selected December 31st as its fiscal
year end.
The
Company’s sponsor is D and Z Media Holdings LLC, a Delaware limited liability company (the “Sponsor”).
Initial
Public Offering
On
January 28, 2021, the Company consummated the IPO, including the full over-allotment option exercised by the underwriters on January
26, 2021, of 28,750,000 units (the “Units” and, with respect to the Class A common stock and warrants included
in the Units, the “Public Shares” and “Public Warrants”, respectively), at $10.00 per Unit, generating gross
proceeds of $287,500,000, which is discussed in Note 3. Simultaneously with the closing of the IPO, the Company consummated the sale
of private placement warrants (“Private Placement Warrants”, and together with the Public Warrants, the “Warrants”)
at a price of $1.50 per warrant in a private placement to the Sponsor and Loop Capital Markets LLC (“Loop”), generating
gross proceeds of $7,650,000 which is described in Note 4.
Initial
Business Combination
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale
of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating
a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company
must complete a Business Combination having an aggregate fair market value of at least 80% of the assets held in the Trust Account
(as defined below) (excluding deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 6) and
taxes payable on income earned on the Trust Account) at the time of the agreement to enter into an initial Business Combination. The
Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding
voting securities of the target or otherwise acquires a controlling interest in the target 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”). Following the
closing of the IPO on January 28, 2021, a total of $287,500,000 ($10.00 per Unit) from the net proceeds of the sale of the
Units in the IPO and the sale of the Private Placement Warrants was placed in a trust account (“Trust Account”), located
in the United States and invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment
Company Act, with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund
selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier
of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account, as described below.
D and Z
Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note
1—Description of Organization and Business Operations - Continued
The
Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem
all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting
called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder
approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders
will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially $10.00 per Public
Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its
tax obligations). The per-share amount to be distributed to public stockholders who redeem their Public Shares will not be reduced by
the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 6). There will be no redemption
rights upon the completion of a Business Combination with respect to the Warrants.
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 shares voted are voted in favor of the Business
Combination. If a stockholder vote is not required by law or stock exchange requirements and the Company does not decide to hold a stockholder
vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended
and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities
and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination.
If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business
or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not
pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Company’s
initial stockholders, officers and directors have agreed to vote their Founder Shares (as defined in Note 5) and any Public Shares purchased
during or after the IPO in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their
Public Shares irrespective of whether they vote for or against the proposed transaction.
Notwithstanding
the above, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender
offer rules, the Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of
such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section
13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares
with respect to more than an aggregate of 15% or more of the Public Shares, without the prior consent of the Company.
The
Company’s initial stockholders, officers and directors have agreed (i) to waive their redemption rights with respect to the Founder
Shares and Public Shares held by them in connection with the completion of a Business Combination, (ii) not to propose an amendment to
the Company’s Amended and Restated Certificate of Incorporation that would modify the substance or timing of the Company’s
obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination within the Combination Period
(as defined below) or with respect to any other material provisions relating to stockholders’ rights or pre-initial Business Combination
activity, unless the Company provides the public stockholders with the opportunity to redeem their shares in conjunction with any such
amendment and (iii) to waive their redemption rights with respect to the Founder Shares and Public Shares held by them in connection
with a stockholder vote to approve an amendment referred to in clause (ii).
The
Company will have until January 28, 2023 to consummate a Business Combination (as such period may be extended pursuant to the Amended
and Restated Certificate of Incorporation, the “Combination Period”). If the Company is unable to complete a Business Combination
within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably
possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the
aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously
released to the Company to pay taxes (less up to $100,000 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 Company’s board of directors, dissolve
and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the
requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Warrants, which
will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
D and Z
Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note
1—Description of Organization and Business Operations - Continued
The
Company’s initial stockholders, officers and directors agreed to waive their right to liquidating distributions from the Trust
Account with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However,
if the Company’s initial stockholders, officers or directors acquire Public Shares in or after the IPO, such Public Shares will
be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination
Period. The underwriters have agreed to waive their rights to their deferred underwriting commissions (see Note 6) held in the Trust
Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts
will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In
the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less
than the IPO price per Unit ($10.00).
In
order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims
by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered
into a written letter of intent, confidentiality or similar agreement, reduce the amount of funds in the Trust Account to below the lesser
of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the liquidation of the
Trust Account, if less than $10.00 per Public Share due to reductions in the value of the trust assets, less taxes payable, provided
that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all
rights to the monies held in the Trust Account 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 of 1933, as amended (the “Securities Act”).
Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible
to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have
to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses
or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim
of any kind in or to monies held in the Trust Account.
Note
2—Significant Accounting Policies
Risks
and Uncertainties
On
January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain
of coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as
a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve.
The impact of the COVID-19 outbreak on the Company’s financial position will depend on future developments, including
the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 outbreak
on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall
economy are impacted for an extended period, the Company’s financial position may be materially adversely affected. Additionally,
the Company’s ability to complete an initial Business Combination may be materially adversely affected due to significant governmental
measures being implemented to contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdown
of businesses and quarantines, among others, which may limit the Company’s ability to have meetings with potential investors or
affect the ability of a potential target company’s personnel, vendors and service providers to negotiate and consummate an
initial Business Combination in a timely manner. The Company’s ability to consummate an initial Business Combination may also be
dependent on the ability to raise additional equity and debt financing, which may be impacted by the COVID-19 outbreak and
the resulting market downturn. The condensed financial statements do not include any adjustments that might result from the outcome of
this uncertainty.
D and Z
Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note
2—Significant Accounting Policies - Continued
Basis
of Presentation
The
accompanying condensed financial statements are presented in conformity with accounting principles generally accepted in the United States
of America (“GAAP”) and 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 the fair presentation of the financial position
as of June 30, 2022 and the results of operations and cash flows for the period presented and should be read in conjunction with the
Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The financial information as of December 31, 2021 is
derived from the audited financial statements presented in the Company’s Annual Report on Form 10-K for the year ended December
31, 2021. The interim results for the six months ended June 30, 2022 are not necessarily indicative of the results to be expected for
the year ending December 31, 2022 or for any future periods.
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our
Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required
to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced
disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously
approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with
the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected
not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application
dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time
private companies adopt the new or revised standard.
Liquidity,
Capital Resources and Going Concern
As of June 30, 2022, the Company had $412,957 of
cash and cash equivalents and working capital deficit of $(1,328,144).
On
September 28, 2021, the Company issued an unsecured promissory note to the Sponsor, whereby the Sponsor has agreed to loan up to $1,000,000 to
the Company for working capital needs (the “Sponsor Working Capital Loan”). The Sponsor Working Capital Loan accrues no interest
on the unpaid principal balance. The Sponsor Working Capital Loan is due on the earlier of (i) the date on which the Company consummates
its initial Business Combination and (ii) the date that the winding up of the Company is effective. As of June 30, 2022 and December
31, 2021, the Company has drawn down $650,000.
D and Z
Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note
2—Significant Accounting Policies - Continued
Until
consummation of its Business Combination, the Company will be using the funds not held in the Trust Account, and any additional Working
Capital Loans (as defined in Note 5) for identifying and evaluating prospective acquisition candidates, performing business due diligence
on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing
corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring,
negotiating and consummating the Business Combination.
To complete a Business Combination, the Company
may need to raise additional capital through loans or additional investments from the Sponsor, the Company’s officers or directors
or third parties. Other than the Sponsor Working Capital Loan described above, the Company cannot provide assurance that new financing
will be available to it on commercially acceptable terms, if at all. Additionally, the Company has until January 28, 2023 to consummate
a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by this time. If the Company
does not consummate a Business Combination by such date and an extension has not been approved by the Company’s stockholders, there
will be a mandatory liquidation and subsequent dissolution of the Company. These conditions raise substantial doubt about the Company’s
ability to continue as a going concern through one year from the date of these condensed financial statements if a Business Combination
is not consummated. These condensed financial statements do not include any adjustments relating to the recovery of the recorded assets
or classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
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 and cash equivalents.
The Company did not have any cash equivalents as of June 30, 2022 and December 31, 2021.
Marketable
Securities Held in Trust Account
At
June 30, 2022, the assets held in the Trust Account were held in money market funds which invest in U.S. Treasury securities. During
the six months ended June 30, 2022 and 2021, the Company did not withdraw any of the interest income from the Trust Account to pay its
tax obligations.
Fair
Value Measurements
Financial
Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 820 “Fair Value
Measurements and Disclosures” (“ASC 820”) defines fair value, the methods used to measure fair value and the expanded
disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between the buyer and the seller at the measurement date. In determining fair value, the valuation techniques
consistent with the market approach, income approach and cost approach shall be used to measure fair value. ASC 820 establishes a fair
value hierarchy for inputs, which represent the assumptions used by the buyer and seller in pricing the asset or liability. These inputs
are further defined as observable and unobservable inputs. Observable inputs are those that buyer and seller would use in pricing the
asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s
assumptions about the inputs that the buyer and seller would use in pricing the asset or liability developed based on the best information
available in the circumstances.
The
fair value hierarchy is categorized into three levels based on the inputs as follows:
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 and 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.
D and Z
Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note
2—Significant Accounting Policies - Continued
The
fair value of the Company’s certain assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value
Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet as of June 30, 2022 and the balance
sheet as of December 31, 2021. The fair values of cash and cash equivalents, prepaid assets, accounts payable and accrued expenses
are estimated to approximate the carrying values as of June 30, 2022 and December 31, 2021 due to the short maturities of such instruments.
| | |
Fair
Value Measured as of
June 30, 2022 | | |
| |
| | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| Assets: | |
| | |
| | |
| | |
| |
| U.S. Treasury Securities held in Trust Account | |
$ | 287,885,616 | | |
$ | - | | |
$ | - | | |
$ | 287,885,616 | |
| | |
$ | 287,885,616 | | |
$ | - | | |
$ | - | | |
$ | 287,885,616 | |
| | |
| | | |
| | | |
| | | |
| | |
| Liabilities: | |
| | | |
| | | |
| | | |
| | |
| Private stock warrant liabilities | |
$ | - | | |
$ | - | | |
$ | 510,000 | | |
$ | 510,000 | |
| Convertible promissory note – related party | |
| - | | |
| - | | |
| 377,340 | | |
| 377,340 | |
| Public stock warrant liabilities | |
| 958,333 | | |
| - | | |
| - | | |
| 958,333 | |
| | |
$ | 958,333 | | |
$ | - | | |
$ | 887,340 | | |
$ | 1,845,673 | |
| | |
Fair Value Measured as of
December 31,
2021 | | |
| |
| | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| Assets: | |
| | |
| | |
| | |
| |
| U.S. Treasury Securities held in Trust Account | |
$ | 287,517,214 | | |
$ | - | | |
$ | - | | |
$ | 287,517,214 | |
| | |
$ | 287,517,214 | | |
$ | - | | |
$ | - | | |
$ | 287,517,214 | |
| | |
| | | |
| | | |
| | | |
| | |
| Liabilities: | |
| | | |
| | | |
| | | |
| | |
| Private stock warrant liabilities | |
$ | - | | |
$ | - | | |
$ | 2,958,000 | | |
$ | 2,958,000 | |
| Convertible promissory note – related party | |
| - | | |
| - | | |
| 480,203 | | |
| 480,203 | |
| Public stock warrant liabilities | |
| 5,558,333 | | |
| - | | |
| - | | |
| 5,558,333 | |
| | |
$ | 5,558,333 | | |
$ | - | | |
$ | 3,438,203 | | |
$ | 8,996,536 | |
Warrants
The
Warrants are accounted for as liabilities pursuant to FASB ASC Topic 815-40, Derivatives and Hedging, Contracts in Entity’s Own
Equity (“ASC 815-40”) and are measured at fair value as of each reporting period. Changes in the fair value of the Warrants
are recorded in the statement of operations each period.
D and Z
Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note
2—Significant Accounting Policies - Continued
As
of June 30, 2022 and December 31, 2021, the estimated fair value of the Public Warrants was determined by their public trading price
and the estimated fair value of the Private Placement Warrants was determined using a Modified Black-Scholes valuation model using Level
3 inputs. Significant inputs to the valuation are as follows:
| | |
As
of
June 30,
2022 | | |
As
of
December 31,
2021 | |
| Exercise
price | |
$ | 11.50 | | |
$ | 11.50 | |
| Stock price | |
| 9.81 | | |
| 9.75 | |
| Volatility | |
| 2.40 | % | |
| 13.50 | % |
| Term | |
| 5.00 | | |
| 5.00 | |
| Risk-free
rate | |
| 3.01 | % | |
| 1.26 | % |
| Dividend
yield | |
| 0.00 | % | |
| 0.00 | % |
Convertible
Promissory Note – Related Party
The
Company utilizes a compound option valuation model to estimate fair value of the convertible promissory note at each reporting period
with changes recognized in the statements of operations. Significant inputs to the valuation are as follows:
| | |
As of
June 30,
2022 | | |
As of
December 31,
2021 | |
| Conversion price | |
$ | 1.50 | | |
$ | 1.50 | |
| Private warrant price | |
| 0.10 | | |
| 0.58 | |
| Volatility | |
| 2.40 | % | |
| 13.50 | % |
| Term | |
| 0.58 | | |
| 0.85 | |
| Risk-free rate | |
| 2.56 | % | |
| 0.29 | % |
| Dividend yield | |
| 0.00 | % | |
| 0.00 | % |
| Number of steps | |
| 50 | | |
| 50 | |
The
following table presents a summary of the changes in the fair value of the convertible promissory note – related party and Private
Placement Warrants, Level 3 liabilities, measured on a recurring basis as of June 30, 2022 and December 31, 2021:
| Convertible promissory note and private placement warrant liabilities at December 31, 2021 | |
$ | 3,438,203 | |
| Change in fair value of convertible promissory note – related party | |
| (102,863 | ) |
| Change in fair value of warrant liabilities | |
| (2,448,000 | ) |
| Convertible promissory note and private placement warrant liabilities at June 30, 2022 | |
$ | 887,340 | |
| Convertible promissory note and private placement warrant liabilities at December 31, 2020 | |
$ | - | |
| Issuance of private warrants | |
| 3,111,000 | |
| Proceeds received through convertible promissory note – related party | |
| 650,000 | |
| Change in fair value of convertible promissory note – related party | |
| (169,797 | ) |
| Change in fair value of warrant liabilities | |
| (153,000 | ) |
| Convertible promissory note and private placement warrant liabilities at December 31, 2021 | |
$ | 3,438,203 | |
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 limit of $250,000. At June 30, 2022 and December 31, 2021, the
Company has not experienced losses on these accounts.
D and Z
Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note
2—Significant Accounting Policies - Continued
Derivative
warrant liabilities
The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates
all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain
features that qualify as embedded derivatives. The classification of derivative instruments, including whether such instruments should
be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The 9,583,333 Public
Warrants issued in connection with the IPO and the 5,100,000 Private Placement Warrants are recognized as derivative liabilities
in accordance with ASC 815-40. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjust the
instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised,
and any change in fair value is recognized in the Company’s statement of operations. The fair value of the Warrants issued in connection
with the IPO and private placement were initially measured at fair value using the Black-Scholes method for Private Placement Warrants
and a Monte Carlo simulation model for Public Warrants. Subsequent to being publicly traded, the Company uses the publicly traded warrant
price for Public Warrants and the Black-Scholes method for Private Placement Warrants to estimate fair value at each measurement date.
Convertible
Promissory Note – Related Party
The
Company accounts for the convertible promissory note under ASC 815, Derivatives and Hedging (“ASC 815”). Under 815-15-25,
the election can be made at the inception of a financial instrument to account for the instrument under the fair value option under ASC
825. The Company has made such election for the convertible promissory note. Using the fair value option, the convertible promissory
note is required to be recorded at its initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in
the estimated fair value of the note are recognized as non-cash gains or losses in the statements of operations.
Common
Stock Subject to Possible Redemption
The
Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing
Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) is classified as a liability instrument
and measured at fair value. Conditionally redeemable Class A common stock (including common stock shares that feature redemption rights
that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the
Company’s control) is classified as temporary equity. At all other times, shares of common stock are classified as stockholders’
equity. The Company’s common stock shares feature certain redemption rights that are considered to be outside of the Company’s
control and subject to the occurrence of uncertain future events. Accordingly, as of June 30, 2022 and December 31, 2021, 28,750,000 shares
of Class A common stock subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders’
equity section of the Company’s balance sheet.
At
June 30, 2022 and December 31, 2021, the Class A common stock subject to possible redemption reflected in the balance sheet is reconciled
in the following table:
| Gross proceeds | |
$ | 287,500,000 | |
| Less: | |
| | |
| Common stock issuance costs | |
| (15,978,191 | ) |
| Derivative public warrant liability | |
| (5,750,000 | ) |
| Plus: | |
| | |
| Fair value adjustment of carrying value to redemption value | |
| 21,728,191 | |
| Class A common stock subject to possible redemption | |
$ | 287,500,000 | |
Offering
Costs
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 principally of professional and registration fees incurred through the balance sheet date
that are related to the IPO and were charged to stockholders’ equity upon the completion of the IPO. Accordingly, as of June 30,
2022 and December 31, 2021, offering costs in the aggregate of $15,978,191 have been charged to stockholders’ equity (consisting
of $5,635,000 in cash underwriting fees, $9,861,250 in deferred underwriting fees and $481,941 of other offering costs).
D and Z
Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note
2—Significant Accounting Policies - Continued
Use
of Estimates
The
preparation of the 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 during
the reporting period. Actual results could differ from those estimates.
Income
Taxes
The
Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax
assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included
the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be
realized.
The
Financial Accounting Standards Board (“FASB”) ASC 740 prescribes a recognition threshold and a measurement attribute for
the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes
accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and
no amounts accrued for interest and penalties as of June 30, 2022 and December 31, 2021. The Company is currently not aware of any issues
under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income
tax examinations by major taxing authorities since inception.
The
Company may be subject to potential examination by federal, state and city taxing authorities in the areas of income taxes. These potential
examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance
with federal, state and city 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. The effective tax rate differs from the statutory tax rate of 21% for the six
months ended June 30, 2022 and 2021, due to the valuation allowance recorded on the Company’s net operating losses and permanent
differences related to the warrant liabilities and convertible promissory note.
On
March 27, 2020, the CARES Act was enacted in response to COVID-19 pandemic. Under ASC 740, the effects of changes in tax rates and laws
are recognized in the period which the new legislation is enacted. The CARES Act made various tax law changes including among other things
(i) increasing the limitation under Section 163(j) of the Internal Revenue Code of 1986, as amended (the “IRC”) for 2019
and 2020 to permit additional expensing of interest (ii) enacting a technical correction so that qualified improvement property can be
immediately expensed under IRC Section 168(k), (iii) making modifications to the federal net operating loss rules including permitting
federal net operating losses incurred in 2018, 2019, and 2020 to be carried back to the five preceding taxable years in order to generate
a refund of previously paid income taxes and (iv) enhancing the recoverability of alternative minimum tax credits. Given the Company’s
full valuation allowance position and capitalization of all costs, the CARES Act did not have an impact on the condensed financial statements.
Net
income (loss) Per Common Stock Shares
The
Company applies the two-class method in calculating net loss per common stock 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
loss per common stock share is computed by dividing the pro rata net loss between the Class A common stock and the Class B common stock
by the weighted average number of common stock outstanding for each of the periods. The calculation of diluted loss per common stock
does not consider the effect of the Warrants sold in the IPO and private placement since the exercise of such Warrants is contingent
upon the occurrence of future events and the inclusion of such Warrants would be anti-dilutive. The Warrants are exercisable for 14,683,333 shares
of Class A common stock in the aggregate.
D and Z
Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note
2—Significant Accounting Policies - Continued
| | |
Six Months
Ended
June 30,
2022 | | |
Six Months
Ended
June 30,
2021 | |
| Class A Common Stock | |
| | |
| |
| Numerator: Earnings allocable to Redeemable Class A Common Stock | |
| | |
| |
| Net income (loss) allocable to Class A Common Stock subject to possible redemption | |
$ | 4,576,868 | | |
$ | (5,347,236 | ) |
| Denominator: Weighted Average Class A Common Stock | |
| | | |
| | |
| Basic and diluted weighted average shares outstanding | |
| 28,750,000 | | |
| 24,277,778 | |
| Basic and diluted net income (loss) per share | |
$ | 0.16 | | |
$ | (0.22 | ) |
| | |
| | | |
| | |
| Non-redeemable common stock | |
| | | |
| | |
| Numerator: Net Loss minus Net Earnings | |
| | | |
| | |
| Net income (loss) allocable to non-redeemable common stock | |
$ | 1,144,217 | | |
$ | (1,583,063 | ) |
| Denominator: Weighted Average non-redeemable common stock | |
| | | |
| | |
| Basic and diluted weighted average shares outstanding | |
| 7,187,500 | | |
| 7,187,500 | |
| Basic and diluted net income (loss) per share | |
$ | 0.16 | | |
$ | (0.22 | ) |
| | |
Three Months
Ended
June 30,
2022 | | |
Three Months
Ended
June 30,
2021 | |
| Class A Common Stock | |
| | |
| |
| Numerator: Earnings allocable to Redeemable Class A Common Stock | |
| | |
| |
| Net income (loss) allocable to Class A Common Stock subject to possible redemption | |
$ | 1,946,593 | | |
$ | (4,453,231 | ) |
| Denominator: Weighted Average Class A Common Stock | |
| | | |
| | |
| Basic and diluted weighted average shares outstanding | |
| 28,750,000 | | |
| 28,750,000 | |
| Basic and diluted net income (loss) per share | |
$ | 0.07 | | |
$ | (0.15 | ) |
| | |
| | | |
| | |
| Non-redeemable common stock | |
| | | |
| | |
| Numerator: Net Loss minus Net Earnings | |
| | | |
| | |
| Net income (loss) allocable to non-redeemable common stock | |
$ | 486,648 | | |
$ | (1,113,308 | ) |
| Denominator: Weighted Average non-redeemable common stock | |
| | | |
| | |
| Basic and diluted weighted average shares outstanding | |
| 7,187,500 | | |
| 7,187,500 | |
| Basic and diluted net income (loss) per share | |
$ | 0.07 | | |
$ | (0.15 | ) |
Recent
Accounting Standards
In
August 2020, the Financial Accounting Standards Board 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 adopted ASU 2020-06 effective January 1, 2022. The adoption of ASU 2020-06 did not
have an impact on the Company’s financial statements.
Management
does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material
effect on our condensed financial statements.
D and Z
Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note
3—Initial Public Offering
Pursuant
to the IPO, the Company sold 28,750,000 Units at a purchase price of $10.00 per Unit. Each Unit consists of one share
of Class A common stock and one-third of one redeemable Public Warrant. Each whole Public Warrant entitles the holder to purchase one
share of Class A common stock at a price $11.50 per share, subject to adjustment. Each Public Warrant will become exercisable 30
days after the completion of the initial Business Combination and will expire five years after the completion of the initial
Business Combination or earlier upon redemption or liquidation (see Note 8).
Note
4—Private Placement
Simultaneously
with the closing of the IPO, the Sponsor and Loop purchased 4,915,217 Private Placement Warrants and 184,783 Private
Placement Warrants, respectively, for an aggregate of 5,100,000 Private Placement Warrants at a price of $1.50 per Private
Placement Warrant, for a total purchase price of $7,650,000 in a private placement. A portion of the proceeds from the private placement
was added to the proceeds from the IPO held in the Trust Account.
Each
Private Placement Warrant is identical to the Public Warrants underlying the Units sold in the IPO, except that (1) the Private Placement
Warrants and the shares of Class A common stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable
or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions, (2) the Private Placement
Warrants are non-redeemable, (3) the Private Placement Warrants may be exercised by the holders on a cashless basis and (4) the holders
of the Private Placement Warrants (including with respect to the shares of Class A common stock issuable upon exercise of the Private
Placement Warrants) are entitled to registration rights. If the Private Placement Warrants are held by someone other than the Sponsor,
Loop or their permitted transferees, the Private Placement Warrants will be redeemable by the Company in all redemption scenarios and
exercisable by such holders on the same basis as the Public Warrants. In addition, the Private Placement Warrants held by Loop may not
be exercised after January 25, 2026.
Note
5—Related Party Transactions
Founder
Shares
On
October 19, 2020, the Sponsor subscribed to purchase 7,187,500 shares of the Company’s Class B common stock, par value
$0.0001 per share (the “Founder Shares”), and fully paid for those shares on October 20, 2020. In December 2020,
the Sponsor transferred 25,000 Founder Shares to each of Christine Zhao, Louise Sams, Scott Kurnit, Matthew C. Blank and Dan Rosensweig
and 50,000 Founder Shares to Brian Grazer at their original purchase price. In January 2021, the Sponsor transferred 100,000 Founder
Shares to Loop at their original purchase price. The transfer of these Founder Shares resulted in the Sponsor holding 6,912,500 Founder
Shares. The owners of the Founder Shares had agreed to forfeit up to 937,500 Founder Shares to the extent that the over-allotment option
was not exercised in full by the underwriter, so that the Founder Shares represent 20% of the Company’s issued and outstanding
shares after the IPO. The over-allotment was exercised in full on January 26, 2021 and none of the shares were forfeited.
The
initial stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the
earlier to occur of: (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business
Combination, (x) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock
splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing
at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital
stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right
to exchange their shares of common stock for cash, securities or other property.
Related
Party Loans
On
October 19, 2020, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the IPO pursuant
to a promissory note. This loan was non-interest bearing and payable on the earlier of March 31, 2021 and the completion or abandonment
of the IPO. As of December 31, 2020, the Company had an outstanding balance of $159,625 and received an additional $56,367 of
loan proceeds in January 2021. The total loan balance outstanding of $215,992 was paid back on January 29, 2021.
In
addition, in order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor
or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company
funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company may repay
the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would
be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may
use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account
would be used to repay the Working Capital Loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination
or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post
Business Combination entity at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants.
D and
Z Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 5—Related Party Transactions - Continued
On September 28, 2021, the Company issued an unsecured
promissory note to the Sponsor, whereby the Sponsor has agreed to loan up to $1,000,000 to the Company for working capital needs.
The Sponsor Working Capital Loan accrues no interest on the unpaid principal balance. The Sponsor Working Capital Loan is due on the earlier
of (i) the date on which the Company consummates its initial Business Combination and (ii) the date that the winding up of the Company
is effective. At the discretion of the Sponsor, the Sponsor Working Capital Loan may be convertible into warrants of the post -Business
Combination entity at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants. As of June
30, 2022, the Company had an outstanding balance of $650,000 under the Sponsor Working Capital Loan. This note was valued using the
fair value method as discussed in Note 2. The fair value of the note as of June 30, 2022 and December 31, 2021, was $377,340 and $480,203,
respectively, which resulted in a change in fair value of the convertible promissory note of $102,863 recorded in the statements
of operations for the six months ended June 30, 2022.
Service and Administrative Fees
The Company had agreed, commencing on January
26, 2021, to pay the Sponsor a total of $15,000 per month for office space, secretarial and administrative support until completion
of the Business Combination or the Company’s liquidation. On May 25, 2021, the Company and the Sponsor agreed to cease such agreement.
Services Agreement
In February 2021, the Sponsor entered into a Strategic
Services Agreement (the “Services Agreement”) with the Company’s Chief Financial Officer (CFO) to provide services to
the Company. The Sponsor agreed to pay the CFO $30,000 on a monthly basis for services until the earlier of the Company completing
a Business Combination or January 31, 2022. The Services Agreement was subsequently amended on January 31, 2022 to extend its term through
the earlier of the Company completing a Business Combination or the Company’s liquidation (see Note 10). In accordance with SEC
SAB 5T, “Accounting for Expenses or Liabilities Paid by Principal Stockholder,” the Company recorded a $180,000 and $150,000 as
formation and operating costs with a credit to additional paid-in capital as executive compensation for the six months ended June 30,
2022 and June 30, 2021, respectively.
Note 6—Commitments & Contingencies
Registration Rights
The holders of Founder Shares, Private Placement
Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any, and any shares of Class A common stock issuable
upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon
conversion of the Founder Shares are entitled to registration rights pursuant to a registration rights agreement signed on January 25,
2021, the effective date of the IPO. These holders are entitled to certain demand and “piggyback” registration rights. The
Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters are also entitled to $0.35 per
Unit of the gross proceeds of the IPO, totaling $10,062,500. This fee will become payable to the underwriters from the amounts held in
the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
D and
Z Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 7—Stockholders’ Equity
Preferred Stock—The Company
is authorized to issue 1,000,000 shares of preferred stock, par value $0.0001 per share, with such designations, voting
and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of June 30, 2022
and December 31, 2021, there were no shares of preferred stock issued or outstanding.
Class A Common Stock—The Company
is authorized to issue 200,000,000 shares of Class A common stock with a par value of $0.0001 per share. At June 30, 2022
and December 31, 2021, there were no Class A common shares issued and outstanding, excluding 28,750,000 Class A shares
subject to possible redemption.
Class B Common Stock—The
Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001 per share. The Sponsor
subscribed to purchase 7,187,500 Founder Shares, which was fully paid on October 20, 2020. In December 2020, the Sponsor transferred 25,000 Founder
Shares to each of Christine Zhao, Louise Sams, Scott Kurnit, Matthew C. Blank and Dan Rosensweig and 50,000 Founder Shares
to Brian Grazer at their original purchase price. In January 2021, the Sponsor transferred 100,000 Founder Shares to Loop at
their original purchase price. The transfer of these Founder Shares resulted in the Sponsor holding 6,912,500 Founder Shares.
Stockholders of record are entitled to one vote
for each share held on all matters to be voted on by stockholders. Holders of the Class A common stock and holders of the Class B common
stock will vote together as a single class on all matters submitted to a vote of the Company’s stockholders, except as required
by law.
The shares of Class B common stock will automatically
convert into Class A common stock concurrently with or immediately following the consummation of the initial Business Combination on a
one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject
to further adjustment as described herein.
In the case that additional shares of Class A
common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts issued in the IPO and related to the closing
of the initial Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock
will be adjusted (unless the holders of a majority of the then-outstanding shares of Class B common stock agree to waive such adjustment
with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of
all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of
all shares of common stock outstanding after such conversion (after giving effect to any redemptions of shares of Class A common stock
by public stockholders), plus all shares of Class A common stock issued, or deemed issued or issuable upon conversion or exercise of any
equity-linked securities or rights issued or deemed issued in connection with or in relation to the consummation of the initial Business
Combination (excluding any shares of Class A common stock or equity-linked securities or rights issued or issuable to any seller in the
initial Business Combination and any Private Placement Warrants issued to the Sponsor or an affiliate of the Sponsor or the Company’s
officers and directors upon conversion of Working Capital Loans), minus the number of shares of Class A common stock redeemed in connection
with the initial Business Combination, provided that such conversion will never occur on a less than one-for-one basis.
Note 8—Warrant Liabilities
Public Warrants may only be exercised for a whole
number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade.
The Public Warrants will become exercisable 30 days after the completion of a Business Combination, provided that the Company has an effective
registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of
the Public Warrants and a current prospectus relating to them is available and such shares are registered, qualified or exempt from registration
under the securities, or blue sky, laws of the state of residence of the holder (or the Company permits holders to exercise their Public
Warrants on a cashless basis under the circumstances specified in the warrant agreement). 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, and within 60 business days following the initial Business Combination to have declared effective, a registration statement covering
the issuance of 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; provided, that if the Class A common stock is at the
time of any exercise of a Warrant not listed on a national securities exchange such that it satisfies the definition of a “covered
security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise
their Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the
Company so elects, it will not be required to file or maintain in effect a registration statement, but it will be required to 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
will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
D and
Z Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 8—Warrant Liabilities - Continued
The Warrants have an exercise price of
$11.50 per share. If (x) the Company issue 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 Company’s 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 held by them prior to such issuance) (the “Newly Issued
Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and
interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial
Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s shares of Class
A common stock during the 20 trading day period starting on the trading after the day on which the Company consummates the initial
Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of each warrant
will be adjusted (to the nearest cent) such that the effective exercise price per full share will be equal to 115% of the
higher of (i) the Market Value and (ii) the Newly Issued Price, and the $18.00 per share redemption trigger price described
below will be adjusted (to the nearest cent) to be equal to 180% of the higher of (i) the Market Value and (ii) the Newly
Issued Price.
The Private Placement Warrants are identical to
the Public Warrants, except that (1) the Private Placement Warrants and the shares of Class A common stock issuable upon exercise of the
Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination,
subject to certain limited exceptions, (2) the Private Placement Warrants are non-redeemable, (3) the Private Placement Warrants may be
exercised by the holders on a cashless basis and (4) the holders of the Private Placement Warrants (including with respect to the shares
of Class A common stock issuable upon exercise of the Private Placement Warrants) are entitled to registration rights. If the Private
Placement Warrants are held by someone other than the Sponsor, Loop or their permitted transferees, the Private Placement Warrants will
be redeemable by the Company in all redemption scenarios and exercisable by such holders on the same basis as the Public Warrants. In
addition, the Private Placement Warrants held by Loop may not be exercised after January 25, 2026.
The Company may call the Public Warrants for redemption:
| ● | in whole and not in part; |
| ● | at a price of $0.01 per warrant; |
| ● | upon a minimum of 30 days’ prior written notice of
redemption; and |
| ● | if, and only if, the last reported sale price of the Class
A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations
and the like and for certain issuances of Class A common stock and equity-linked securities for capital raising purposes in connection
with the closing of the initial Business Combination) for any 20 trading days within the 30-trading day period ending on the third business
day prior to the date on which the Company sends the notice of redemption to the warrant holders. |
If the Company calls the Public Warrants for redemption,
management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,”
as described in the warrant agreement.
In no event will the Company be required to net
cash settle any warrant. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates
the funds held in the Trust Account, holders of Warrants will not receive any of such funds with respect to their Warrants, nor will they
receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such Warrants. Accordingly,
the Warrants may expire worthless.
Note 9—Subsequent Events
The Company evaluated events that have occurred
after the balance sheet date through the date on which the condensed financial statements were issued. Based upon this review, the Company
did not identify any subsequent events, except as noted, that would have required adjustment or disclosure in the condensed financial
statements.
On July 1, 2022, the Company transferred $280,050 of interest income
from the Trust Account to the Company’s operating account to reimburse for Delaware franchise taxes of $200,050 paid in 2021 and
$80,000 paid in 2022.
