Item
1. Condensed Consolidated Financial Statements.
FORUM
MERGER III CORPORATION
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
1,038,353
|
|
|
$
|
1,555,497
|
|
Prepaid expenses
|
|
|
174,124
|
|
|
|
157,486
|
|
Total Current Assets
|
|
|
1,212,477
|
|
|
|
1,712,983
|
|
|
|
|
|
|
|
|
|
|
Cash and marketable securities held in Trust Account
|
|
|
250,004,042
|
|
|
|
250,066,590
|
|
Total Assets
|
|
$
|
251,216,519
|
|
|
$
|
251,779,573
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities - Accounts payable and accrued expenses
|
|
$
|
3,815,030
|
|
|
$
|
3,329,929
|
|
Deferred underwriting fee payable
|
|
|
8,750,000
|
|
|
|
8,750,000
|
|
Warrant liabilities
|
|
|
16,325,028
|
|
|
|
29,859,848
|
|
Total Liabilities
|
|
|
28,890,058
|
|
|
|
41,939,777
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A common stock subject to possible redemption, 21,732,646 and 20,483,979 shares at redemption value as of March 31, 2021 and December 31, 2020, respectively
|
|
|
217,326,460
|
|
|
|
204,839,790
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding
|
|
|
—
|
|
|
|
—
|
|
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 4,008,604 and 5,257,271 issued and outstanding (excluding 21,732,646 and 20,483,979, none shares subject to possible redemption) as of March 31, 2021 and December 31, 2020, respectively
|
|
|
401
|
|
|
|
526
|
|
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 6,250,000 shares issued and outstanding as of March 31, 2021 and December 31, 2020
|
|
|
625
|
|
|
|
625
|
|
Additional paid-in capital
|
|
|
21,875,691
|
|
|
|
34,362,236
|
|
Accumulated deficit
|
|
|
(16,876,716
|
)
|
|
|
(29,363,381
|
)
|
Total Stockholders’ Equity
|
|
|
5,000,001
|
|
|
|
5,000,006
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
251,216,519
|
|
|
$
|
251,779,573
|
|
The
accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
FORUM
MERGER III CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
Three Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
$
|
1,054,321
|
|
|
$
|
160
|
|
Loss from operations
|
|
|
(1,054,321
|
)
|
|
|
(160
|
)
|
|
|
|
|
|
|
|
|
|
Other income:
|
|
|
|
|
|
|
|
|
Interest earned on marketable securities held in Trust Account
|
|
|
6,166
|
|
|
|
—
|
|
Change in fair value of warrant liabilities
|
|
|
13,534,820
|
|
|
|
—
|
|
Net income (loss)
|
|
$
|
12,486,665
|
|
|
$
|
(160
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding of Class A redeemable common stock
|
|
|
25,000,000
|
|
|
|
—
|
|
Basic and diluted income per share, Class A
|
|
$
|
0.00
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding of Class A and Class B non-redeemable common stock
|
|
|
6,991,250
|
|
|
|
6,250,000
|
|
Basic net income (loss) per share, Class A and Class B non-redeemable common stock
|
|
$
|
1.79
|
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding
of Class A and Class B non-redeemable common stock and non-redeemable warrants
|
|
|
7,152,316
|
|
|
|
6,250,000
|
|
Diluted net loss per
share, Class A and Class B non-redeemable common stock and non-redeemable warrants
|
|
$
|
(0.15
|
)
|
|
$
|
(0.00
|
)
|
The
accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
FORUM
MERGER III CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
THREE
MONTHS ENDED MARCH 31, 2021
|
|
Class A
Common Stock
|
|
|
Class B
Common Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
Balance – January 1, 2021
|
|
|
5,257,271
|
|
|
$
|
526
|
|
|
|
6,250,000
|
|
|
$
|
625
|
|
|
$
|
34,362,236
|
|
|
$
|
(29,363,381
|
)
|
|
$
|
5,000,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of Class A common stock subject to possible
redemption
|
|
|
(1,248,667
|
)
|
|
|
(125
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(12,486,545
|
)
|
|
|
—
|
|
|
|
(12,486,670
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,486,665
|
|
|
|
12,486,665
|
|
Balance – March 31, 2021
|
|
|
4,008,604
|
|
|
$
|
401
|
|
|
|
6,250,000
|
|
|
$
|
625
|
|
|
$
|
21,875,691
|
|
|
$
|
(16,876,716
|
)
|
|
$
|
5,000,001
|
|
THREE
MONTHS ENDED MARCH 31, 2020
|
|
Class A
Common Stock
|
|
|
Class B
Common Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
Balance – January 1, 2020
|
|
|
—
|
|
|
$
|
—
|
|
|
|
7,187,500
|
|
|
$
|
719
|
|
|
$
|
24,281
|
|
|
$
|
(2,156
|
)
|
|
$
|
22,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(160
|
)
|
|
|
(160
|
)
|
Balance – March 31, 2020
|
|
|
—
|
|
|
$
|
—
|
|
|
|
7,187,500
|
|
|
$
|
719
|
|
|
$
|
24,281
|
|
|
$
|
(2,316
|
)
|
|
$
|
22,684
|
|
The
accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
FORUM
MERGER III CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Three Months Ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
12,486,665
|
|
|
$
|
(160
|
)
|
Adjustments to reconcile net income (loss) to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Change in fair value of warrant liabilities
|
|
|
(13,534,820
|
)
|
|
|
—
|
|
Interest earned on marketable securities held in Trust Account
|
|
|
(6,166
|
)
|
|
|
—
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
(16,638
|
)
|
|
|
—
|
|
Accounts payable and accrued expenses
|
|
|
485,101
|
|
|
|
350
|
|
Net cash (used in) provided by operating activities
|
|
|
(585,858
|
)
|
|
|
190
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
Cash withdrawn from Trust Account for the payment of franchise taxes
|
|
|
68,714
|
|
|
|
—
|
|
Net cash provided by investing activities
|
|
|
68,714
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash
|
|
|
(517,144
|
)
|
|
|
190
|
|
Cash – Beginning of period
|
|
|
1,555,497
|
|
|
|
19,810
|
|
Cash – End of period
|
|
$
|
1,038,353
|
|
|
$
|
20,000
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Change in value of Class A common stock subject to possible redemption
|
|
$
|
12,486,670
|
|
|
$
|
—
|
|
The
accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
NOTE
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Forum
Merger III Corporation (the “Company”) was incorporated in Delaware on June 25, 2019. 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 Company is not limited to a particular industry or sector for purposes of consummating a Business Combination
(as defined in Note 6).
The
Company has one subsidiary, ELMS Merger Corp., a wholly owned subsidiary of the Company incorporated in Delaware on December 3, 2020
(“Merger Sub”).
As
of March 31, 2021, the Company had not commenced any operations. All activity through March 31, 2021 relates to the Company’s formation,
its initial public offering (“Initial Public Offering”), which is described below, identifying a target company for a Business
Combination, and activities in connection with the proposed acquisition of Electric Last Mile, Inc., a Delaware corporation (“ELM”).
The Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The
registration statement for the Company’s Initial Public Offering was declared effective on August 18, 2020. On August 21, 2020
the Company consummated the Initial Public Offering of 25,000,000 units (the “Units” and, with respect to the shares of Class
A common stock included in the Units sold, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $250,000,000
which is described in Note 3.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of an aggregate of 741,250 units (the “Private
Placement Units”) at a price of $10.00 per Private Placement Unit in a private placement to Forum Investors III LLC, a Delaware
limited liability company (the “Sponsor”), and the underwriters of the Initial Public Offering, generating gross proceeds
of $7,412,500, which is described in Note 4.
Transaction
costs amounted to $14,185,268, consisting of $5,000,000 of underwriting fees, $8,750,000 of deferred underwriting fee and $435,268 of
other offering costs.
Following
the closing of the Initial Public Offering on August 21, 2020, an amount of $250,000,000 ($10.00 per Unit) from the net proceeds of the
sale of the Units in the Initial Public Offering and the sale of the Private Placement Units was placed in a trust account (the “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 of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or
less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions
of paragraphs (d)(2), (d)(3) and (d)(4) 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.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering
and the sale of the Private Placement Units, although substantially all of the net proceeds are intended to be applied generally toward
consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully.
The Company must complete one or more Business Combinations having an aggregate fair market value of at least 80% of the value of the
assets held in the Trust Account (as defined below) (excluding the deferred underwriting commissions and taxes payable on interest earned
on the Trust Account) at the time of the Company’s signing a definitive agreement in connection with its 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 business sufficient for it not to be required
to register as an investment company under the Investment Company Act.
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 at a per-share price, payable in cash, equal to the aggregate amount then on deposit in
the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest (which interest
shall be net of taxes payable), divided by the number of then outstanding Public Shares, subject to the limitations described below.
There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s 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 applicable law or stock exchange listing 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 applicable law or stock exchange
listing requirements, 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 Sponsor has agreed to vote its Founder
Shares (as defined below in Note 5), its Private Placement Shares (as defined in Note 4) and any Public Shares acquired by it during
or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each public stockholder may elect to
redeem their Public Shares irrespective of whether they vote for or against the proposed transaction.
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
Sponsor has agreed (a) to waive its redemption rights with respect to its Founder Shares, Private Placement Shares and Public Shares
held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated
Certificate of Incorporation (i) that would affect 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 or (ii) 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 Public Shares in conjunction with any such amendment.
If
the Company is unable to complete a Business Combination by August 21, 2022 (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 not previously released to the Company to pay its franchise and income taxes (less up to $100,000 of
interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish
public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject
to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s
remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s
obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption
rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to
complete a Business Combination within the Combination Period.
The
Sponsor has agreed to waive its liquidation rights with respect to the Founder Shares and Private Placement Shares if the Company fails
to complete a Business Combination within the Combination Period. However, if the Sponsor acquires Public Shares in or after the Initial
Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete
a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting
commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within in 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 Initial Public Offering 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 or business combination agreement, reduce the amount of funds in
the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per public share held in the trust account
as of the date of the liquidation of the trust account, if less than $10.00 per Public Share due to reductions in the value of the trust
assets, less taxes payable. This liability will not apply with respect 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 Initial Public Offering against certain liabilities, including liabilities under the Securities
Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable
against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will
seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to
have all vendors, service providers (except the Company’s independent registered public accounting firm), 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.
Liquidity
and Going Concern
As
of March 31, 2021, the Company had approximately $1.0 million in cash in its operating bank accounts, and a working capital deficit of
approximately $2.6 million.
In
connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s
Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue
as a Going Concern,” the Company has determined that the liquidity condition raises substantial doubt about the Company’s
ability to continue as a going concern. The Company will need to raise additional capital through loans or additional investments from
its Sponsor, stockholders, officers, directors, or third parties. The Company’s officers, directors and Sponsor may, but are not
obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion,
to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company
is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but
not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses.
The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These
conditions raise substantial doubt about the Company’s ability to continue as a going concern through one year from the date of
these financial statements if a Business Combination is not consummated. These financial statements do not include any adjustments relating
to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable
to continue as a going concern.
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the
instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included
in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of
the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete
presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary
for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The
accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on
10-K/A as filed with the SEC on May 7, 2021. The interim results for the three months ended March 31, 2021 are not necessarily
indicative of the results to be expected for the year ending December 31, 2021 or for any future interim periods.
Principles
of Consolidation
The
accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant
intercompany balances and transactions have been eliminated in consolidation.
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 of
2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from
the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments
not previously approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of
such extended transition period which means that when a standard is issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which
is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult
or impossible because of the potential differences in accounting standards used.
Use
of Estimates
The
preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires the Company’s management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and
expenses during the reporting periods. One of the more significant accounting estimates included in these financial statements is the determination of the fair value of the
warrant liabilities.
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 unaudited condensed consolidated financial
statements, which management considered in formulating its estimate, could change in the near term due to one or more future
confirming events. Accordingly, the actual results could differ significantly from those estimates.
Class
A Common Stock Subject to Possible Redemption
The
Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards
Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory
redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common
stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of
uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is
classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to
be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at March 31, 2021 and December
31, 2020, Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity
section of the Company’s condensed consolidated balance sheets.
Offering
Costs
Offering
costs consisted of legal, accounting, underwriting fees and other that were directly related to the Initial Public Offering.
Offering costs were allocated on a relative fair value basis between stockholders’ equity and expense. The portion of offering
costs allocated to the public warrants has been charged to expense. The portion of offering costs allocated to the public shares has
been charged to stockholders’ equity. Offering costs amounted to $14,185,268, of which $13,949,056 were charged to
stockholders’ equity upon the completion of the Initial Public Offering on August 21, 2020 and $236,212 were expensed to the
condensed consolidated statements of operations.
Warrant
Liabilities
The
Company accounts for the Public Warrants (as defined in Note 3) and Private Placement Warrants (as defined in Note 4) (collectively,
the “Warrants”) in accordance with the guidance contained in ASC 815-40 under which the Warrants do not meet the criteria
for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Warrants as liabilities at their fair
value and adjust the Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet
date until exercised, and any change in fair value is recognized in our statement of operations. The Private Warrants and the Public
Warrants for periods where no observable traded price was available are valued using a Monte Carlo simulation. For periods subsequent
to the detachment of the Public Warrants from the Units, the Public Warrant quoted market price was used as the fair value as of each
relevant date.
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. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
As of March 31, 2021 and December 31, 2020, the Company had a deferred tax asset of approximately $1,166,000 and $900,000, respectively,
which had a full valuation allowance recorded against it of approximately $1,166,000 and $900,000, respectively.
The
Company’s currently taxable income primarily consists of interest income on the Trust Account. The Company’s general and
administrative costs are generally considered start-up costs and are not currently deductible. During the three months ended March 31,
2021, the Company recorded no income tax expense. The Company’s effective tax rate for the three months ended March 31, 2021 was
zero, which differs from the expected income tax rate due to the start-up costs (discussed above) which are not currently deductible
and permanent differences due to the change in the fair value of the warrant liabilities. The provision for income taxes was deemed to
be de minimis for the three months ended March 31, 2020.
ASC
740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions
taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be
sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits
as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2021
and December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals
or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
Net
Income (Loss) Per Common Share
Net
income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding
for the periods.
The
Company’s unaudited condensed consolidated statements of operations includes a presentation of income (loss) per share for
common shares subject to possible redemption in a manner similar to the two-class method of income (loss) per share. Net income per
common share, basic and diluted, for Class A redeemable common stock is calculated by dividing the interest income earned on the
Trust Account, by the weighted average number of Class A redeemable common stock outstanding since original issuance. Net income
(loss) per share, basic for Class A and B non-redeemable common stock is calculated by dividing the net loss, adjusted
for income attributable to Class A redeemable common stock, by the weighted average number of Class A and B non-redeemable common
stock outstanding for the period. Share settlement of the Company's warrants to purchase an aggregate of 8,580,416 shares of Class A common stock at a price of $11.50 was
presumed for the calculation of diluted earnings per share because it is more dilutive than the cash settlement alternative. Under this
assumption, the contract is settled in common shares, and the effect of the liability classification (change in fair value of derivative
warrant liability is reversed as a numerator adjustment). Potentially dilutive weighted average shares of 161,066 are included in the
denominator. Class A and B non-redeemable common stock includes the Founder Shares and Private Placement Shares
as these shares do not have any redemption features and do not participate in the income earned on the Trust Account.
The
following table reflects the calculation of basic and diluted net income (loss) per common share (in dollars, except per share amounts):
|
|
Three Months Ended March 31
|
|
|
|
2021
|
|
|
2020
|
|
Redeemable Class A Common Stock
|
|
|
|
|
|
|
|
|
Numerator: Earnings allocable to Redeemable Class A Common Stock
|
|
|
|
|
|
|
|
|
Interest Income
|
|
$
|
6,166
|
|
|
$
|
—
|
|
Income and Franchise Tax
|
|
|
(6,166
|
)
|
|
|
—
|
|
Net Earnings
|
|
$
|
—
|
|
|
$
|
—
|
|
Denominator: Weighted Average Redeemable Class A Common Stock
|
|
|
|
|
|
|
|
|
Redeemable Class A Common Stock, Basic and Diluted
|
|
|
25,000,000
|
|
|
|
—
|
|
Earnings/Basic and Diluted Redeemable Class A Common Stock
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Non-Redeemable Class A and B Common Stock
|
|
|
|
|
|
|
|
|
Basic Income (Loss) per Share
|
|
|
|
|
|
|
|
|
Numerator: Net loss minus Redeemable Net Earnings
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
12,486,665
|
|
|
$
|
(160
|
)
|
Net Earnings applicable to Redeemable Class A and B Common Stock
|
|
|
—
|
|
|
|
—
|
|
Non-Redeemable Net Income (Loss)
|
|
$
|
12,486,665
|
|
|
$
|
(160
|
)
|
Denominator: Weighted Average Non-Redeemable Class A and B Common Stock
|
|
|
|
|
|
|
|
|
Class A and B Non-Redeemable Common Stock, Basic and Diluted (1)
|
|
|
6,991,250
|
|
|
|
6,250,000
|
|
Income (Loss)/Basic and Diluted Non-Redeemable Class A and B Common Stock
|
|
$
|
1.79
|
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
Diluted Loss per Share
|
|
|
|
|
|
|
|
|
Numerator: Non-Redeemable Net Income - Basic minus Change in fair value of warrant liabilities
|
|
|
|
|
|
|
|
|
Non-Redeemable Net Income - Basic
|
|
$
|
12,486,665
|
|
|
$
|
(160
|
)
|
Less: Change in fair value of warrant liabilities
|
|
|
(13,534,820
|
)
|
|
|
—
|
|
Non-Redeemable Net Loss – Diluted
|
|
$
|
(1,048,155
|
)
|
|
$
|
(160
|
)
|
Denominator: Weighted Average Non-Redeemable Class A and B Common Stock
|
|
|
|
|
|
|
|
|
Class A and B Non-Redeemable Common Stock, Diluted (2)
|
|
|
7,152,316
|
|
|
|
6,250,000
|
|
Loss/Diluted Non-Redeemable Class A and B Common Stock
|
|
$
|
(0.15
|
)
|
|
$
|
(0.00
|
)
|
(1)
|
The
weighted average non-redeemable common stock for the three months ended March 31, 2021 includes the effect of 741,250 Private Placement
Units, which were issued in conjunction with the Initial Public Offering in August 2020.
|
(2)
|
As
of March 31, 2021, diluted weighted average shares outstanding was calculated using the treasury stock method utilizing a weighted
average share price of $11.72 and the effect of the warrants sold in the Initial Public Offering and the private placement to purchase
an aggregate of 8,580,416 shares of common stock.
|
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution,
which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account
and management believes the Company is not exposed to significant risks on such account.
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurement,”
approximates the carrying amounts represented in the accompanying condensed consolidated balance sheets, primarily due to their short-term
nature.
Recent
Accounting Standards
In
August 2020, the FASB issued ASU No. 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): Accounting for Convertible Instruments and Contracts in an
Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major
separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts
to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas.
ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with
early adoption permitted. The Company adopted ASU 2020-06 effective as of January 1, 2021. 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 the Company’s condensed consolidated financial statements.
NOTE
3. INITIAL PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold 25,000,000 Units, at a price of $10.00 per Unit. Each Unit consists of one share of
Class A common stock and one-third of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder
to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7).
NOTE
4. PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, the Sponsor and the underwriters purchased an aggregate of 741,250 Private Placement
Units at a price of $10.00 per Private Placement Unit, for an aggregate purchase price of $7,412,500. The Sponsor purchased 616,250 Private
Placement Units and the underwriters purchased 125,000 Private Placement Units. Each Private Placement Unit consists of one share of
Class A common stock (“Private Placement Share”) and one-third of one warrant (each, a “Private Placement Warrant”).
Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at an exercise price of $11.50 per share,
subject to adjustment. The proceeds from the sale of the Private Placement Units were added to the proceeds from the Initial Public Offering
held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the
sale of the Private Placement Units held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the
requirements of applicable law), and the Private Placement Units and all underlying securities will expire worthless.
NOTE
5. RELATED PARTY TRANSACTIONS
Founder
Shares
On
June 26, 2019, the Sponsor purchased 5,750,000 shares of the Company’s Class B common stock (the “Founder Shares”)
for an aggregate price of $25,000. On July 1, 2020, the Company effected a stock split of 1:1.25 with respect to the Class B common stock,
resulting in the Sponsor holding an aggregate of 7,187,500 Founder Shares.
The
Founder Shares included an aggregate of up to 937,500 shares of Class B common stock subject to forfeiture by the Sponsor to the extent
that the underwriters’ over-allotment was not exercised in full or in part, so that the Sponsor would own, on an as-converted basis,
20% of the Company’s issued and outstanding shares after the Initial Public Offering (assuming the Sponsor does not purchase any
Public Shares in the Initial Public Offering and excluding the Private Placement Shares). On October 5, 2020, the underwriters’
over-allotment option expired unexercised, resulting in the forfeiture of 937,500 shares. Accordingly, as of October 5, 2020, there are
6,250,000 Founder Shares issued and outstanding (see Note 7).
The
Sponsor has agreed, subject to certain limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier
to occur of: (A) one year after the completion of a Business Combination or (B) subsequent to a Business Combination, (x) if the closing
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 a Business
Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction
that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities
or other property.
Administrative
Support Agreement
The
Company entered into an agreement, commencing on August 19, 2020, to pay an affiliate of the Sponsor a total of $25,000 per month for
24 months for office space, utilities and secretarial and administrative support. Such payments will be accelerated if the Company consummates
its initial Business Combination prior to the end of its 24-month term, or $600,000 in the aggregate. For the three months ended
March 31, 2021, the Company incurred and paid $75,000 in fees for these services.
Related
Party Loans
On
June 26, 2019, as amended on July 2, 2020, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related
to the Initial Public Offering pursuant to a promissory note (the “Promissory Note”). The Promissory Note was non-interest
bearing and payable on the earlier of December 31, 2020 or the completion of the Initial Public Offering. The outstanding balance under
the Promissory Note of $40,000 was repaid at the closing of the Initial Public Offering on August 21, 2020.
In
addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor,
or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans. Otherwise,
the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination
does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds
held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital
Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either
be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,200,000 of such
Working Capital Loans may be convertible into units of the post Business Combination entity at a price of $10.00 per unit. The units
would be identical to the Private Placement Units. As of March 31, 2021 and December 31, 2020, no Working Capital Loans were outstanding.
NOTE
6. COMMITMENTS AND CONTINGENCIES
Risks
and Uncertainties
Management
continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus
could have a negative effect on the Company’s financial position, results of its operations and/or close 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.
Registration
Rights
Pursuant
to a registration rights agreement entered into on August 18, 2020, the holders of the Founder Shares (including any shares of Class
A common stock issuable upon conversion of the Founder Shares), Private Placement Units, Private Placement Shares, Private Placement
Warrants (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants), and securities that may
be issued upon conversion of Working Capital Loans are entitled to registration rights requiring the Company to register such securities
for resale (in the case of the Founder Shares, only after conversion to Class A common stock). Certain holders of these securities will
be entitled to make up to three demands, excluding short form demands, that the Company register such securities for sale under the Securities
Act. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed
subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant
to Rule 415 under the Securities Act. Notwithstanding the foregoing, the underwriters may not exercise their demand and “piggyback”
registration rights after five and seven years after the effective date of the registration statement related to the Initial Public Offering
and may not exercise their demand rights on more than one occasion. The Company will bear the expenses incurred in connection with the
filing of any such registration statements.
Underwriting
Agreement
The
Company granted the underwriters a 45-day option from the date of the Initial Public Offering to purchase up to 3,750,000 additional
Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. On October
5, 2020, the underwriters’ over-allotment option expired unexercised.
The
underwriters are entitled to a deferred fee of $0.35 per Unit, or $8,750,000 in the aggregate. The deferred fee will be forfeited by
the underwriters solely in the event that the Company fails to complete a Business Combination, subject to the terms of the underwriting
agreement.
Merger
Agreement
On
December 10, 2020, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Merger Sub, ELM,
and Jason Luo, in the capacity as the initial stockholder representative thereto, pursuant to which, subject to the satisfaction or waiver
of certain conditions set forth therein, Merger Sub will merge with and into ELM (the “Merger”), with ELM surviving the merger
in accordance with the Delaware General Corporation Law as a wholly owned subsidiary of the Company (the transactions contemplated by
the Merger Agreement and the related ancillary agreements, the “Business Combination”). The Business Combination is subject
to certain closing conditions, including the Carveout Transaction (as defined in the Merger Agreement). Prior to the Carveout Transaction,
ELM will have limited operations.
The
aggregate consideration payable to the stockholders of ELM at the closing of the Business Combination (the “Closing”) is
$1,300,000,000, payable solely in shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”),
valued at $10.00 per share, subject to the purchase price adjustments and deductions as set forth in the Merger Agreement less
$292,000,000, the value of the 29,200,000 shares of Common Stock reserved for a new long-term equity incentive plan ($150,000,000 of
which are restricted share units with vesting terms substantially similar to the Earnout Shares (as defined below)), less $2,500,000,
the value of the Adjustment Escrow Stock (as defined below), and less $50,000,000, the value of the Earnout Shares (the “Closing
Merger Consideration”).
In
addition, an aggregate of 5,000,000 shares of Common Stock (the “Earnout Shares”) will be placed into escrow at Closing and
will be payable to ELM stockholders (the “ELM Stockholders”) during the 36-month period following the Closing (the “Earnout
Period”) as follows: (i) if the closing price of the Common Stock (the “Closing Price”) equals or exceeds $14.00 on
any 20 trading days in any 30-consecutive-day trading period, then 2,500,000 Earnout Shares will be released from escrow to the ELM Stockholders,
and (ii) if the Closing Price equals or exceeds $16.00 on any 20 trading days in any 30-consecutive-day trading period, then the remaining
2,500,000 Earnout Shares will be released from escrow to the ELM Stockholders. Subject to the terms and conditions set forth in the Merger
Agreement, if a qualifying Change in Control (as defined in the Merger Agreement) occurs during the Earnout Period, all Earnout Shares
not previously released will be released to the ELM Stockholders. Any Earnout Shares not released prior to the expiration of the Earnout
Period will be forfeited and cancelled.
The
Company has agreed that, at the Closing, the Company will place 250,000 shares of Common Stock into an adjustment escrow account (the
“Adjustment Escrow Stock”) to secure any downward post-closing purchase price adjustment. Following the date on which the
Closing Merger Consideration is finally determined, all or a portion of those shares of Common Stock will either be released to the ELM
Stockholders or released to the Company in accordance with the adjustment mechanisms set forth in the Merger Agreement.
The
Merger Agreement contains customary representations, warranties and covenants by the parties thereto and the closing is subject to certain
conditions as further described in the Merger Agreement.
NOTE
7. STOCKHOLDERS’ EQUITY
Preferred
Stock — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with
such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors.
At March 31, 2021 and December 31, 2020, there were no shares of preferred stock issued or outstanding.
Class
A Common Stock — The Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001
per share. Holders of Class A common stock are entitled to one vote for each share. At March 31, 2021 and December 31, 2020, there were
4,008,604 and 5,257,271 shares of Class A common stock issued and outstanding, excluding 21,732,646 and 20,483,979 Class A common stock
subject to possible redemption, respectively.
Class
B Common Stock — The Company is authorized to issue 10,000,000 shares of Class B common stock with a par value of $0.0001
per share. Holders of Class B common stock are entitled to one vote for each share At March 31, 2021 and December 31, 2020, there were
6,250,000 shares of Class B common stock issued and outstanding, respectively.
Holders
of Class A common stock and Class B common stock will vote together as a single class on all matters submitted to a vote of stockholders,
except as required by law.
The
shares of Class B common stock will automatically convert into shares of Class A common stock at the time of the consummation of a 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. 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 offered in the Initial Public Offering and in connection with the closing of a Business
Combination, 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, 25% of the sum of the total number of all shares of Class A common stock outstanding after
such conversion (after giving effect to any redemptions of shares of Class A common stock by public stockholders and excluding the shares
of Class A common stock underlying the Private Placement Units), including the total number of shares of Class A common stock issued,
or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company
in connection with or in relation to the consummation of a Business Combination, excluding any shares of Class A common stock or equity-linked
securities or rights exercisable for or convertible into shares of Class A common stock issued, or to be issued, to any seller in a Business
Combination or any private placement-equivalent units issued to the Sponsor, its affiliates or certain of the Company’s officers
and directors upon conversion of Working Capital Loans made to the Company, provided that such conversion of the shares of Class B
common stock will never occur on a less than one-for-one basis.
NOTE
8. WARRANT LIABILITIES
As
of March 31, 2021, there were 8,580,416 Warrants outstanding. Public Warrants may only be exercised for a whole number of shares. No
fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable
on the later of (a) 12 months from the closing of the Initial Public Offering and (b) 30 days after the completion of a Business
Combination.
The
Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation
to settle such warrant exercise unless a registration statement under the Securities Act with respect to the issuance of the shares of
Class A common underlying the warrants is then effective and a current prospectus relating thereto is current, subject to the Company
satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue
any shares of Class A common stock upon exercise of a warrant unless the Class A common stock issuable upon such warrant exercise has
registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder.
The
Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination,
it will use its commercially reasonable efforts to file with the SEC a registration statement registering the issuance, under the Securities
Act, of the shares of Class A common stock issuable upon exercise of the warrants. The Company will use its commercially reasonable
efforts to cause the same to become effective and to maintain the effectiveness of such registration statement and a current prospectus
relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. If a registration
statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th
business day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration
statement and during the period when the Company will have failed to maintain an effective registration statement, exercise the warrants
on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the
above, 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, the Company will not be required to file or maintain
in effect a registration statement, but will use its commercially reasonable efforts to register or qualify the shares under applicable
blue sky laws to the extent an exemption is not available.
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 (except with respect to the Private Placement Warrants):
|
●
|
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 to each warrant holder; and
|
|
|
|
|
●
|
if,
and only if, the closing price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like and for certain issuances of Class A common stock and equity-linked
securities as described below) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the
date the Company sends the notice of redemption to the warrant holders.
|
If
and when the warrants become redeemable by the Company, it may exercise its redemption right even if the Company is unable to register
or qualify the underlying securities for sale under all applicable state securities laws.
Redemption
of warrants when the price per share of Class A common stock equals or exceeds $10.00. Once the warrants become exercisable,
the Company may redeem the outstanding warrants:
|
●
|
in
whole and not in part;
|
|
|
|
|
●
|
at
$0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise
their warrants on a cashless basis prior to redemption and receive that number of shares, based on the redemption date and the fair
market value of the Class A common stock;
|
|
|
|
|
●
|
if,
and only if, the closing price of the Class A common stock equals or exceeds $10.00 per share (as adjusted per stock splits,
stock dividends, reorganizations, reclassifications, recapitalizations and the like) for any 20 trading days within the 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;
and
|
|
|
|
|
●
|
if
the closing price of the Class A common stock for any 20 trading days within the 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 is less than $18.00 per share (as
adjusted per stock splits, stock dividends, reorganizations, reclassifications, recapitalizations and the like), the Private Placement
Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above.
|
If
the Company calls the Public Warrants for redemption for cash, 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. The exercise price and number
of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a
stock dividend, or recapitalization, reorganization, merger or consolidation. However, except as described below, the warrants will not
be adjusted for issuance of common stock at a price below its exercise price. Additionally, in no event will the Company be required
to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company
liquidates the funds held in the Trust Account, holders of 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.
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 a Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A
common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors,
and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor
or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from
such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination
on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of
the common stock during the 20 trading day period starting on the trading day after the day on which the Company consummates a 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.
The
Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that
the Private Placement Warrants and the shares of common stock issuable upon the exercise of the Private Placement Warrants will not be
transferable, assignable or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions,
and will be entitled to certain registration rights (see Note 6). Additionally, the Private Placement Warrants will be exercisable for
cash or on a cashless basis, at the holder’s option, and be non-redeemable so long as they are held by the initial purchasers or
their permitted transferees (except for a number of shares of Class A common stock as described above under Redemption of warrants
when the price per share of Class A common stock equals or exceeds $10.00). If the Private Placement Warrants are held by someone
other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company in
all redemption scenarios and exercisable by such holders on the same basis as the Public Warrants.
NOTE
9. FAIR VALUE MEASUREMENTS
The
fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would
have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction
between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company
seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable
inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is
used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and
liabilities:
|
Level 1:
|
Quoted
prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions
for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|
|
|
|
|
Level 2:
|
Observable
inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities
and quoted prices for identical assets or liabilities in markets that are not active.
|
|
|
|
|
Level 3:
|
Unobservable
inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
The
Company classifies its U.S. Treasury and equivalent securities as held-to-maturity in accordance with ASC Topic 320 “Investments
- Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to
hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost on the accompanying condensed consolidated balance
sheets and adjusted for the amortization or accretion of premiums or discounts.
At March 31, 2021, assets held
in the Trust Account were comprised of $11 in cash and $250,004,031 in money market funds, which are invested in U.S. Treasury securities.
At December 31, 2020, assets held in the Trust Account were comprised of $25 in cash and $250,066,565 in money market funds, which are
invested in U.S. Treasury securities. During the three months ended March 31, 2021, the Company withdrew $68,714 of interest income from
the Trust Account for its franchise taxes.
The
following table presents information about the Company’s assets that are measured at fair value on a recurring basis at March 31,
2021 and December 31, 2020 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair
value:
Description
|
|
Level
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
Marketable securities held in Trust Account – U.S. Treasury Securities Money Market Fund
|
|
1
|
|
$
|
250,004,031
|
|
|
$
|
250,066,565
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
Warrant Liability – Public Warrants
|
|
1
|
|
$
|
15,833,333
|
|
|
$
|
28,999,999
|
|
Warrant Liability – Private Placement Warrants
|
|
3
|
|
$
|
491,695
|
|
|
$
|
859,849
|
|
The
Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities the
accompanying condensed consolidated balance sheets. The warrant liabilities are measured at fair value at inception and on a
recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the condensed
consolidated statement of operations.
The
Private Placement Warrants were valued using a Monte Carlo simulation, which is considered to be a Level 3 fair value measurement. The
Monte Carlo simulation’s primary unobservable input utilized in determining the fair value of the Warrants discount for lack of
marketability and the probability of consummation of the Business Combination. The discount for lack of marketability was determined
using an average between the Finnerty and Chaffee Models at 4.42% as of March 31, 2021 and 4.99% as of December 31, 2020. The probability assigned to the consummation of the Business Combination
was 95% as of March 31, 2021 and 80% as of December 31, 2020 which was determined based on management’s expectations based on the current market conditions and observed historical
success rates of business combinations for special purpose acquisition companies. The measurements of the Public Warrants after the detachment
of the Public Warrants from the Units is classified as Level 1 due to the use of an observable market quote in an active market under
the ticker FIIIW.
The
key inputs into the Monte Carlo simulation for the Private Placement Warrants were as follows:
Input:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Exercise price
|
|
$
|
11.50
|
|
|
$
|
11.50
|
|
Expected term (years)
|
|
|
5.63
|
|
|
|
5.13
|
|
Probability of business combination closing
|
|
|
95.0
|
%
|
|
|
80.0
|
%
|
Risk-free interest rate
|
|
|
1.08
|
%
|
|
|
0.38
|
%
|
Expected volatility
|
|
|
27.5
|
%
|
|
|
21.1
|
%
|
The
following table presents the changes in the fair value of the Level 3 warrant liabilities:
|
|
Private
Placement
|
|
Fair value as of January 1, 2021
|
|
$
|
859,849
|
|
Change in fair value
|
|
|
(368,154
|
)
|
Fair value as of March 31, 2021
|
|
$
|
491,695
|
|
Transfers
to/from Levels 1, 2 and 3 are recognized at the end of the reporting period. There were no transfers between levels for the three months
ended March 31, 2021.
NOTE
10. SUBSEQUENT EVENTS
The
Company evaluated subsequent events and transactions that occurred after the unaudited condensed consolidated balance sheet date up
to the date that the unaudited condensed consolidated financial statements were issued. Based upon this review, the Company did not
identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed consolidated financial
statements.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References
in this quarterly report on Form 10-Q (the “Quarterly Report”) to “we,” “us” or the “Company”
refer to Forum Merger III Corporation. The following discussion and analysis of the Company’s financial condition and results of
operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report
(the “Financial Statements”). Capitalized terms used but not otherwise defined herein have the meaning set forth in the Financial
Statements. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve
risks and uncertainties.
Special
Note Regarding Forward-Looking Statements
This
Quarterly Report includes “forward-looking statements” within the meaning of the Securities Act and Section 21E of the Exchange
Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those
expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without
limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations,
are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,”
“estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs,
based on information currently available. A number of factors could cause actual events, performance or results to differ materially
from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that
could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors
section of the Company’s Annual Report on Form 10-K/A for the period ending December 31, 2020 filed with the SEC and Part II, Item
1A. Risk Factors herein. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov.
Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We
are a blank check company incorporated on June 25, 2019 as a Delaware corporation and 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. We intend
to effectuate our initial Business Combination using cash from the proceeds of our Initial Public Offering and the private placement
of the Private Placement Units, the proceeds of the sale of our shares in connection with our initial Business Combination, shares issued
to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing.
We
expect to continue to incur significant costs in the pursuit of our initial Business Combination. We cannot assure you that our plans
to complete our initial Business Combination will be successful.
ELM
Business Combination
On
December 10, 2020, we entered into the Merger Agreement with Merger Sub, ELM, and Jason Luo, in the capacity as the initial stockholder
representative thereto, pursuant to which, subject to the satisfaction or waiver of certain conditions set forth therein, Merger Sub
will merge with and into ELM , with ELM surviving the merger in accordance with the Delaware General Corporation Law as a wholly owned
subsidiary of the Company. The Business Combination is subject to certain closing conditions, including the Carveout Transaction (as
defined in the Merger Agreement). Prior to the Carveout Transaction, ELM will have limited operations.
The
aggregate consideration payable at the Closing to the ELM Stockholders is payable solely in shares of common stock, valued at $10.00
per share, and is calculated as follows: $1,300,000,000, plus the amount of Estimated Closing Date Cash (as defined
in the Merger Agreement), plus the Pre-Paid Company Transaction Expense Amount (as defined in the Merger Agreement), minus the
Estimated Closing Date Indebtedness (as defined in the Merger Agreement), minus the Convertible Note Adjustment Amount
(as defined in the Merger Agreement), minus $292,000,000, the value of the 29,200,000 shares of Class A common
stock reserved under the new long-term equity incentive plan ($150,000,000 of which are restricted share units with vesting terms substantially
similar to the 5,000,000 shares of Class A common stock to be placed into escrow at the Closing), minus $2,500,000,
the value of the Adjustment Escrow Stock (as defined below) and minus $50,000,000, the value of the Earnout Shares.
In
addition, an aggregate of 5,000,000 shares of Class A common stock will be placed into escrow at the Closing and will be payable to ELM
Stockholders during the Earnout Period as follows: (i) if the Closing Price equals or exceeds $14.00 on any 20 trading days in any 30-consecutive-day
trading period, then 2,500,000 Earnout Shares will be released from escrow to the ELM Stockholders, and (ii) if the Closing Price equals
or exceeds $16.00 on any 20 trading days in any 30-consecutive-day trading period, then the remaining 2,500,000 Earnout Shares will be
released from escrow to the ELM Stockholders. Subject to the terms and conditions set forth in the Merger Agreement, if a qualifying
Change in Control (as defined in the Merger Agreement) occurs during the Earnout Period, all Earnout Shares not previously released will
be released to the ELM Stockholders. Any Earnout Shares not released prior to the expiration of the Earnout Period will be forfeited
and cancelled.
We
have agreed that, at the Closing, we will place 250,000 shares of Class A common stock into an adjustment escrow account to secure any
downward post-closing purchase price adjustment. Following the date on which the Closing Merger Consideration is finally determined,
all or a portion of those shares of Class A common stock will either be released to the ELM Stockholders or released to us in accordance
with the adjustment mechanisms set forth in the Merger Agreement.
The
Merger Agreement contains customary representations, warranties and covenants by the parties thereto and the closing is subject to certain
conditions as further described in the Merger Agreement.
Results
of Operations
We
have neither engaged in any operations (other than searching for a Business Combination after our Initial Public Offering) nor generated
any revenues to date. Our only activities through March 31, 2021 were organizational activities, including those necessary to prepare
for the initial public offering, identifying a target for our Business Combination and activities in connection with the proposed Business
Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We generate
non-operating income in the form of interest income on marketable securities held after the Initial Public Offering. We incur expenses
as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence
expenses.
For
the three months ended March 31, 2021, we had a net income of $12,486,665, which consisted of general and administrative expenses of
$1,054,321, offset by interest income on marketable securities held in the Trust Account of $6,166 and a gain on change in the fair value
of warrant liabilities of $13,534,820.
For
the three months ended March 31, 2020, we had a net loss of $160, which consisted of formation and general and administrative expenses
of $160.
Liquidity
and Capital Resources
On
August 21, 2020, we consummated the Initial Public Offering of 25,000,000 Units at a price of $10.00 per Unit, generating gross proceeds
of $250,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of an aggregate of 741,250 Private
Placement Units at a price of $10.00 per Private Placement Unit in a private placement to our stockholders, generating gross proceeds
of $7,412,500. Each Private Placement Unit consists of one share of Class A common stock and one-third of one warrant.
Following
the Initial Public Offering and the sale of the Private Placement Units, a total of $250,000,000 was placed in a trust located in the
United States. We incurred $14,185,268 in transaction costs, including $5,000,000 of underwriting fees, $8,750,000 of deferred underwriting
fees and $435,268 of other costs.
For
the three months ended March 31, 2021, cash used in operating activities was $585,858. Net income of $12,486,665 was affected by interest
earned on marketable securities held in the Trust Account of $6,166, a change in the fair value of warrant liabilities of $13,534,820,
and changes in operating assets and liabilities, which used $468,463 of cash from operating activities.
For
the three months ended March 31, 2020, cash provided by operating activities was $160. Net loss of $160 was affected by changes in operating
assets and liabilities, which provided $350 of cash from operating activities.
As of March 31, 2021, we had cash
and marketable securities of $250,004,042 held in the Trust Account. We intend to use substantially all of the funds held in the Trust
Account, including any amounts representing interest earned on the Trust Account to complete our Business Combination. We may withdraw
interest to pay taxes. During the three months ended March 31, 2021, the Company withdrew $68,714 of interest income from the Trust Account
for its franchise taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our Business
Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target
business or businesses, make other acquisitions and pursue our growth strategies.
As
of March 31, 2021, we had cash of $1,038,353 outside of the Trust Account. We intend to use the funds held outside the Trust Account
primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and
from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents
and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.
In
order to fund working capital deficiencies or finance transaction costs in connection with our initial Business Combination, our Sponsor
or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required.
If we complete our initial Business Combination, we would repay such loaned amounts. In the event that our initial Business Combination
does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds
from our Trust Account would be used for such repayment. Up to $1,200,000 of such loans may be convertible into units identical to the
Private Placement Units, at a price of $10.00 per unit at the option of the lender.
We
do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However,
if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination
are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business
Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated
to redeem a significant number of our public shares upon consummation of our Business Combination, in which case we may issue additional
securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would
only complete such financing simultaneously with the completion of our Business Combination. If we are unable to complete our Business
Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account.
In addition, following our Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order
to meet our obligations.
Off-Balance
Sheet Arrangements
We
have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of March 31, 2021. We do not
participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable
interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered
into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other
entities, or purchased any non-financial assets.
Contractual
Obligations
We
do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement
to pay an affiliate of the Sponsor a total of $25,000 per month for 24 months for office space, utilities and secretarial and administrative
support. Such payments will be accelerated if the Company consummates its initial Business Combination prior to the end of its 24-month
term, or $600,000 in the aggregate.
In
addition, the underwriters are entitled to a deferred fee of $0.35 per Unit, or $8,750,000 in the aggregate. The deferred fee will be
forfeited by the underwriters solely in the event that we fail to complete a Business Combination, subject to the terms of the underwriting
agreement.
Critical
Accounting Policies
The
preparation of condensed consolidated financial statements and related disclosures in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and
income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the
following critical accounting policies:
Warrant
Liabilities
We
account for the Warrants in accordance with the guidance contained in ASC 815-40 under which the Warrants do not meet the criteria for
equity treatment and must be recorded as liabilities. Accordingly, we classify the Warrants as liabilities at their fair value and adjust
the Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised,
and any change in fair value is recognized in our statement of operations. The Private Warrants and the Public Warrants for periods where
no observable traded price was available are valued using a Monte Carlo simulation. For periods subsequent to the detachment of the Public
Warrants from the Units, the Public Warrant quoted market price was used as the fair value as of each relevant date.
Class
A Common Stock Subject to Possible Redemption
We
account for our 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 is classified as a liability instrument and is measured
at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is either within the
control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as
temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock features certain redemption
rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, the Class
A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of
the Company’s condensed consolidated balance sheets.
Net
Income (Loss) per Common Share
We
apply the two-class method in calculating earnings per share. Net income per common share, basic and diluted for Class A redeemable
common stock is calculated by dividing the interest income earned on the Trust Account, net of applicable taxes, by the weighted average
number of shares of Class A redeemable common stock outstanding for the periods. Net income (loss) per common share, basic for and Class A and Class B non-redeemable common stock is calculated by dividing net income (loss), less income attributable to
Class A redeemable common stock, by the weighted average number of shares of Class A and Class B non-redeemable common stock
outstanding for the periods presented. Share settlement of the Company's warrants to purchase an aggregate of 8,580,416 shares of Class A common stock at a price of $11.50 was
presumed for the calculation of diluted earnings per share because it is more dilutive than the cash settlement alternative. Under this
assumption, the contract is settled in common shares, and the effect of the liability classification (change in fair value of derivative
warrant liability is reversed as a numerator adjustment). Potentially dilutive weighted average shares of 161,066 are included in the
denominator. Class A and Class B nonredeemable common stock includes the Founder Shares and Private Placement
Shares as these shares do not have any redemption features and do not participate in the income earned on the Trust Account.
Recent
Accounting Standards
In
August 2020, the FASB issued ASU No. 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): Accounting for Convertible Instruments and Contracts in an
Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major
separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts
to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas.
ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with
early adoption permitted. We adopted ASU 2020-06 effective as of January 1, 2021. The adoption of ASU 2020-06 did not have an impact
on our 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 consolidated financial statements.