ATHLON ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
Fair Value of Financial Instruments
The fair value of the Companys assets and liabilities, which qualify as financial instruments under ASC Topic 820, Fair Value
Measurement, approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material
effect on the Companys condensed financial statements.
NOTE 2A RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENT
The Company previously accounted for its outstanding Public Warrants (as defined in Note 9) and Private Placement Warrants
(collectively, with the Public Warrants, the Warrants) issued in connection with its Initial Public Offering as components of equity instead of as derivative liabilities. The warrant agreement governing the Warrants includes a provision
that provides for potential changes to the settlement amounts dependent upon the characteristics of the holder of the warrant. In addition, the warrant agreement includes a provision that in the event of a tender offer or exchange offer made to and
accepted by holders of more than 50% of the outstanding shares of a single class of stock, all holders of the Warrants would be entitled to receive cash for their Warrants (the tender offer provision).
On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the Securities and Exchange
Commission together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled Staff Statement on Accounting and Reporting Considerations for Warrants Issued
by Special Purpose Acquisition Companies (SPACs) (the SEC Statement). Specifically, the SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination,
which terms are similar to those contained in the warrant agreement (the Warrant Agreement).
In further consideration of the
SEC Statement, the Companys management further evaluated the Warrants under Accounting Standards Codification (ASC) Subtopic 815-40, Contracts in Entitys Own Equity. ASC Section 815-40-15 addresses equity versus liability
treatment and classification of equity-linked financial instruments, including warrants, and states that a warrant may be classified as a component of equity only if, among other things, the warrant is indexed to the issuers common stock.
Under ASC Section 815-40-15, a warrant is not indexed to the issuers common stock if the terms of the warrant require an adjustment to the exercise price upon a specified event and that event is not an input to the fair value of the warrant.
Based on managements evaluation, the Companys audit committee, in consultation with management, concluded that the Companys Private Placement Warrants are not indexed to the Companys common stock in the manner contemplated by
ASC Section 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares. In addition, based on managements evaluation, the Companys audit committee, in consultation with
management, concluded that the tender offer provision fails the classified in stockholders equity criteria as contemplated by ASC Section 815-40-25.
In accordance with ASC Topic 340, Other Assets and Deferred Costs, as a result of the classification of the warrants as derivative
liabilities, the Company expensed a portion of the offering costs originally recorded as a reduction in equity. The portion of offering costs that was expensed was determined based on the relative fair value of the Public Warrants and shares of
Class A common stock included in the Units.
As a result of the above, the Company should have classified the Warrants as derivative
liabilities in its previously issued financial statement as of January 14th, 2021. Under this accounting treatment, the Company is required to measure the fair value of the Warrants at the end of each reporting period as well as re-evaluate the
treatment of the warrants and recognize changes in the fair value from the prior period in the Companys operating results for the current period.
The Companys accounting for the Warrants as components of equity instead of as derivative liabilities did not have any effect on the
Companys previously reported investments held in trust or cash. The provisions of the Warrants giving rise to this change in treatment were previously disclosed in the discussion of the Warrants contained in the Companys prior filings.
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As
Previously
Reported
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Restatement
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As Restated
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Balance sheet as of January 14, 2021 (audited)
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Warrant Liability
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$
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$
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16,416,400
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$
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16,416,400
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Class A Common Stock Subject to Possible Redemption
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262,888,330
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(16,416,400
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)
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246,471,930
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Class A Common Stock
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131
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164
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295
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Additional Paid-in Capital
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5,006,087
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611,466
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5,617,553
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Accumulated Deficit
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(6,906
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)
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(611,630
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)
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(618,536
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)
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NOTE 3. PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold 27,600,000 Units, which includes a full exercise by the underwriters of their
over-allotment option in the amount of 3,600,000 Units, at a price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and one-half 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 purchased an aggregate of 7,520,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant (including 720,000 Private Placement Warrants purchased in connection with
the exercise of the underwriters over-allotment option) from the Company in a private placement that occurred simultaneously with the closing of the Initial Public Offering. Each Private Placement Warrant is exercisable to purchase one share
of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7). The proceeds from the sale of the Private Placement Warrants were added to the net 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 Warrants 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 Warrants will expire worthless.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
During the period
ended October 13, 2020, the Sponsor purchased 5,750,000 shares (the Founder Shares) of the Companys Class B common stock for an aggregate price of $25,000. In October 2020, the Sponsor transferred an aggregate of 475,000
Founder Shares to the Companys Chief Executive Officer and independent directors for an aggregate purchase price of $2,065.25 or approximately $0.004 per share. On January 11, 2021, the Company effected a 1.2:1 stock split of the
Class B common stock, resulting in the Sponsor holding an aggregate of 6,330,000 Founder Shares and there being an aggregate of 6,900,000 Founder Shares outstanding. As a result of the underwriters election to fully exercise their
over-allotment option a total of 900,000 Founder Shares are no longer subject to forfeiture.
The Sponsor has 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 a Business Combination and (B) subsequent to a 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 capitalizations, 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 Public Stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Administrative Services Agreement
The Company entered into an agreement, commencing on January 11, 2021, to pay the Sponsor a total of $5,000 per month for office space,
operational support and secretarial and administrative services. Upon completion of the Business Combination or the Companys liquidation, the Company will cease paying these monthly fees. For the three months ended March 31, 2021, the
Company incurred $15,000 in fees for these services.
Promissory Note Related Party
On October 9, 2020, the Sponsor issued an unsecured promissory note to the Company (the Promissory Note), pursuant to which
the Company may borrow up to an aggregate principal amount of $300,000. The Promissory Note is non-interest bearing and payable on the earlier of (i) March 31, 2021 or (ii) the consummation of the
Initial Public Offering. The outstanding balance under the Promissory Note of $80,000 was repaid at the closing of the Initial Public Offering on January 14, 2021.
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