NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS
OPERATIONS
Z-Work Acquisition Corp. (the “Company”)
is a blank check company incorporated in Delaware on September 30, 2020. The Company was formed for the purpose of effecting a merger,
capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses
(the “Business Combination”).
The Company is not limited to a particular industry
or sector for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such,
the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of September 30, 2021, the Company had not
commenced any operations. All activity for the period from September 30, 2020 (inception) through September 30, 2021 relates to the Company’s
formation and the initial public offering (“Initial Public Offering”), which is described below. The Company will not generate
any operating revenues until after the completion of its initial Business Combination, at the earliest. 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 January 28, 2021. On February 2, 2021, the Company consummated the Initial Public Offering
of 23,000,000 units (the “Units” and, with respect to the Class A common stock included in the Units sold, the “Public
Shares”), which includes the full exercise by the underwriter of its over-allotment option in the amount of 3,000,000 Units, at
$10.00 per Unit, generating gross proceeds of $230,000,000 which is described in Note 4.
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the sale of 4,733,333 warrants (the “Private Placement Warrants”) at a price of $1.50
per Private Placement Warrant in a private placement to Z-Work Holdings LLC (the “Sponsor”) and Jefferies LLC (“Jefferies”),
generating gross proceeds of $7,100,000, which is described in Note 5.
Transaction costs amounted to $13,088,319, consisting
of $4,600,000 in cash underwriting fees, $8,050,000 of deferred underwriting fees and $438,319 of other offering costs, of which $125,000
was paid through a transfer of membership interests in the Sponsor.
Following the closing of the Initial Public Offering
on February 2, 2021, an amount of $230,000,000 ($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 Warrants was placed in a trust account (the “Trust Account”), located in the
United States and will be 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 certain conditions of Rule 2a-7
of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and
(ii) the distribution of the funds held in 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 Private Placement Warrants,
although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There
is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial
Business Combinations with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets
held in the Trust Account (net of amounts disbursed to management for working capital purposes, if any, and excluding the amount of deferred
underwriting discounts held in trust and taxes payable on the income earned on the Trust Account). 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 the 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. The Public Stockholders will be entitled to redeem their Public Shares for a pro
rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per Public Share, plus any pro rata interest
then in the Trust Account, net of taxes payable). There will be no redemption rights upon the completion of a Business Combination with
respect to the Company’s warrants.
The Company will only proceed with a Business
Combination if the Company has net tangible assets of at least $5,000,001 following any related redemptions 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
reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “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 other 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 Sponsor has
agreed to vote its Founder Shares (as defined in Note 6) and any Public Shares purchased 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 without voting,
and if they do vote, irrespective of whether they vote for or against the proposed transaction.
Notwithstanding the foregoing, if the Company
seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Certificate
of Incorporation will provide 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% of the Public Shares, without the prior consent of the Company.
The Sponsor has agreed (a) to waive its redemption
rights with respect to the Founder Shares and Public Shares held by it in connection with the completion of a Business Combination, (b) to
waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination by February 2,
2023 and (c) not to propose an amendment to the Certificate of Incorporation (i) to modify the substance or timing of the Company’s
obligation to allow redemptions in connection with a Business Combination or to redeem 100% of its Public Shares if the Company does not
complete a Business Combination within the Combination Period (as defined below) or (ii) with respect to any other provision relating
to stockholders’ rights or pre-business combination activity, unless the Company provides the Public Stockholders with the opportunity
to redeem their Public Shares in conjunction with any such amendment. 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 Company will have until February 2, 2023 to
complete a Business Combination (the “Combination Period”). If the Company has not completed a Business Combination within
the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as
reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal
to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not
previously released to pay 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), 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.
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 discussed entering into a transaction 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, provided that such liability will not apply to any claims by a third
party or prospective target business who executed a waiver of any and all rights to 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 for the Company’s independent registered public accounting firm),
prospective target businesses and other entities with which the Company does business, execute agreements with the Company waiving any
right, title, interest or claim of any kind in or to monies held in the Trust Account.
NOTE 2. REVISION OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
In connection with the preparation of the Company’s
financial statements as of September 30, 2021, the Company concluded it should revise its financial statements to classify all Public
Shares in temporary equity. In accordance with the SEC and its staff’s guidance on redeemable equity instruments, ASC 480, paragraph
10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified
outside of permanent equity. The Company previously determined the Class A common stock subject to possible redemption to be equal
to the redemption value of $10.00 per Class A common stock while also taking into consideration a redemption cannot result in net
tangible assets being less than $5,000,001. Previously, the Company did not consider redeemable shares classified as temporary equity
as part of net tangible assets. Effective with these financial statements, the Company revised this interpretation to include temporary
equity in net tangible assets. Accordingly, effective with this filing, the Company presents all redeemable Class A common stock as temporary
equity and recognizes accretion from the initial book value to redemption value at the time of its Initial Public Offering and in accordance
with ASC 480.
As a result, management has noted a reclassification
adjustment related to temporary equity and permanent equity. This resulted in an adjustment to the initial carrying value of the Class A
common stock subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated
deficit and Class A common stock. The Company will present this revision in a prospective manner in all future filings. Under this
approach, the previously issued Initial Public Offering Balance Sheet and Form 10-Q’s will not be amended, but historical amounts
presented in the current and future filings will be recast to be consistent with the current presentation, and an explanatory footnote
will be provided.
In connection with the change in presentation
for the Class A common stock subject to redemption, the Company also revised its income (loss) per common share calculation to allocate
net income (loss) evenly to Class A and Class B common stock. This presentation contemplates a Business Combination as the most likely
outcome, in which case, both classes of common stock share pro rata in the income (loss) of the Company.
There has been no change in the Company’s
total assets, liabilities or operating results.
The impact of the revision on the Company’s financial statements is reflected
in the following table.
Balance Sheet as of February 2, 2021 (Audited)
|
|
As Previously Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
Class A common stock subject to possible redemption
|
|
$
|
205,331,586
|
|
|
$
|
24,668,414
|
|
|
$
|
230,000,000
|
|
Class A common stock
|
|
$
|
247
|
|
|
$
|
(247
|
)
|
|
$
|
—
|
|
Additional paid-in capital
|
|
$
|
5,489,339
|
|
|
$
|
(5,489,339
|
)
|
|
$
|
—
|
|
Accumulated deficit
|
|
$
|
(490,160
|
)
|
|
$
|
(19,178,828
|
)
|
|
$
|
(19,668,988
|
)
|
Total Stockholders’ Equity (Deficit)
|
|
$
|
5,000,001
|
|
|
$
|
(24,668,414
|
)
|
|
$
|
(19,668,413
|
)
|
Number of shares subject to redemption
|
|
|
20,533,159
|
|
|
|
2,466,841
|
|
|
|
23,000,000
|
|
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
for interim financial information and in accordance with the instructions to Form 10-Q and Article 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 financial statements include all adjustments, consisting of a normal recurring nature, which are
necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial
statements should be read in conjunction with the Company’s prospectus for its Initial Public Offering as filed with the SEC on
February 1, 2021, as well as the Company’s Current Report on Form 8-K, as filed with the SEC on February 8, 2021. The interim results
for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending
December 31, 2021. The Company incorporated on September 30, 2020 but had no financial activity for that period. Therefore, no comparative
is included in the financial statements.
Emerging Growth Company
The Company is an “emerging growth company,”
as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”),
and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that
are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting
firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation
in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts
emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that
is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered
under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that 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 the condensed 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 financial statements and the reported amounts
of revenues and expenses during the reporting period.
Making estimates requires management to exercise
significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances
that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near
term due to one or more future confirming events. One of the more significant accounting estimates included in these financial statements
is the determination of the fair value of the warrant liability. Such estimates may be subject to change as more current information becomes
available and, accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents
as of September 30, 2021 and December 31, 2020.
Offering Costs
Offering costs consisted of legal, accounting
and other expenses incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs
were allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared
to total proceeds received. Offering costs allocated to warrant liabilities were expensed as incurred in the statements of operations.
Offering costs associated with the Class A common stock issued were initially charged to temporary equity and then accreted to common
stock subject to redemption upon the completion of the Initial Public Offering Offering costs amounting to $12,598,919 were charged to
stockholders’ equity or as period costs upon the completion of the Initial Public Offering, and $489,399 of the offering costs were
related to the warrant liabilities and charged to the statement of operations.
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 ASC Topic 480 “Distinguishing Liabilities from Equity.” Shares of
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 Class A 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 September 30, 2021, Class A common stock subject to possible redemption is presented as temporary equity, outside
of the stockholders’ equity section of the Company’s balance sheet.
The Company recognizes changes in redemption value
immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting
period. There was no change to redemption value in the current quarter or as of December 31, 2020.
At September 30, 2021, the Class A common stock
reflected in the unaudited condensed balance sheet are reconciled in the following table:
|
|
|
|
Gross proceeds
|
|
$
|
230,000,000
|
|
Less:
|
|
|
|
|
Proceeds allocated to Public Warrants
|
|
|
(8,433,334
|
)
|
Class A common stock issuance costs
|
|
|
(12,473,919
|
)
|
Plus:
|
|
|
|
|
Accretion of carrying value to redemption value
|
|
|
20,907,253
|
|
|
|
|
|
|
Class A common stock subject to possible redemption
|
|
$
|
230,000,000
|
|
Warrant Liabilities
The Company does not use derivative instruments
to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives,
pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The Company accounts for the
Public Warrants and Private Placement Warrants (together with the Public Warrants, 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 adjusts 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. See Note 9 for further discussion of the pertinent terms of the Warrants and Note 10 for further discussion
of the methodology used to determine the value of the warrant liabilities.
Income Taxes
The Company follows the asset and liability method
of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial statements’ carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company’s deferred tax assets
were deemed to be de minimis as of September 30, 2021 and December 31, 2020.
The Company’s current taxable income primarily
consists of interest earned on the Trust Account. The Company’s general and administrative costs are generally considered start-up
costs and are not currently deductible. The change in fair value of the warrant liability is a permanent difference. During the three
and nine months ended September 30, 2021, the Company recorded no income tax expense. The Company’s effective tax rate for three
and nine months ended September 30, 2021 was 0%, which differs from the expected income tax rate due to the start-up costs (discussed
above) which are not currently deductible and permanent differences.
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 September 30, 2021 and December 31, 2020. The Company is currently
not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The
Company is subject to income tax examinations by major taxing authorities since inception.
Net Income (Loss) per Common Share
The Company complies with accounting and disclosure
requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per common share is computed by dividing net income
(loss) by the weighted average number of common stock outstanding for the period. The Company applies the two-class method in calculating
earnings per share.
Accretion associated with the redeemable
shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
The Company has not considered the effect of warrants
sold in the Initial Public Offering and private placement to purchase 12,400,000 shares of Class A common stock in the calculation
of diluted income per share, since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion
of such warrants would be anti-dilutive.
The following table reflects the calculation of
basic and diluted net income (loss) per common share (in dollars, except share amounts):
|
|
Three Months
Ended
September 30,
2021
|
|
|
Nine Months
Ended
September 30,
2021
|
|
|
|
Class A
|
|
|
Class B
|
|
|
Class A
|
|
|
Class B
|
|
Basic and diluted net income per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of net income, as adjusted
|
|
$
|
1,717,725
|
|
|
$
|
429,431
|
|
|
$
|
2,593,670
|
|
|
$
|
723,285
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding
|
|
|
23,000,000
|
|
|
|
5,750,000
|
|
|
|
20,304,029
|
|
|
|
5,662,088
|
|
Basic and diluted net income per common share
|
|
$
|
0.07
|
|
|
$
|
0.07
|
|
|
$
|
0.13
|
|
|
$
|
0.13
|
|
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times may exceed the Federal
Depository Insurance Corporation coverage limit of $250,000. As of September 30, 2021 and December 31, 2020, the Company has not experienced
losses on these accounts 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 (excluding the warrant liabilities) which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,”
approximate the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other
Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”)
to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial
conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining
to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible
debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings
per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective
January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1,
2021. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operation
or cash flows.
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 unaudited
condensed financial statements.
NOTE 4. PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company
sold 23,000,000 Units, which includes a full exercise by the underwriters of their over-allotment option in the amount of 3,000,000 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 9).
NOTE 5. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial
Public Offering, the Sponsor and Jefferies purchased an aggregate of 4,733,333 Private Placement Warrants (3,966,666 warrants to the Sponsor
and 766,667 warrants to Jefferies), at a price of $1.50 per Private Placement Warrant ($7,100,000) from the Company in a private placement.
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 9). 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 6. RELATED PARTY TRANSACTIONS
Founder Shares
On December 1, 2020, the Sponsor purchased 5,750,000
shares (the “Founder Shares”) of the Company’s Class B common stock for an aggregate price of $25,000. The Founder
Shares included an aggregate of up to 750,000 shares subject to forfeiture to the extent that the underwriters’ over-allotment was
not exercised in full or in part, so that the number of Founder Shares would equal, on an as-converted basis, approximately 20% of the
Company’s issued and outstanding common stock after the Initial Public Offering. As a result of the underwriters’ election
to fully exercise their over-allotment option, no Founder Shares are currently 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 had agreed to pay the Sponsor $10,833
per month for up to 24 months, equal to $130,000 per year through the earlier of the Company’s consummation of a Business Combination
and its liquidation. In light of additional administrative support services to be provided, the Company amended and restated the administrative
support agreement to provide that, as of February 1, 2021, the Company would pay the Sponsor $12,500 per month, or $150,000 per year,
$100,000 of which will be paid to the Company’s President and Chief Financial Officer and $50,000 will be paid for additional support
services sourced from Communitas Capital, a venture firm of which the Company’s Executive Co-Chairman is Managing Partner. For the
three and nine months ended September 30, 2021, the Company incurred $37,500 and $95,833 in fees for these services, respectively, of
which $95,833 is included in accrued expenses in the accompanying condensed balance sheet at September 30, 2021. There were no amounts
included in accrued expenses at December 31, 2020.
Promissory Note — Related Party
On October 1, 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. As of December 31, 2020, there was $38,711 in borrowings outstanding
under the Promissory Note, and as of September 30, 2021, there were no borrowings outstanding under the Promissory Note. Borrowings under
the Promissory Note are no longer available.
Related Party Loans
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 out of the proceeds of the Trust Account released to the Company.
Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination
does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds
held in the Trust Account would be used to repay the Working Capital Loans. 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 $1,500,000 of such
Working Capital Loans may be convertible into warrants of the post-Business Combination entity at a price of $1.50 per warrant. The warrants
would be identical to the Private Placement Warrants. As of September 30, 2021 and December 31, 2020, no such Working Capital Loans were
outstanding.
Anchor Investor
P. Schoenfeld Asset Management LP, an institutional
investor (the “anchor investor” or “PSAM”) purchased 2,000,000 of the units sold in the Initial Public Offering,
or 8.7% of the units sold in our Initial Public Offering, at the public offering price of $10.00 per unit.
PSAM has also purchased membership interests in
our sponsor representing an indirect beneficial interest in 400,000 founder shares and 666,667 private placement warrants held by our
sponsor (which we refer to as the “anchor founder shares” and “anchor private placement warrants”, respectively)
for $1,000,000, which represents a price for founder shares and private placement warrants equal to those paid by other outside investors
in our sponsor. The terms to which the anchor founder shares and the anchor private placement warrants, respectively, are subject are
also substantially identical to the terms to which the remaining founder shares and private placement warrants, respectively, are subject,
except that: (i) PSAM will receive no anchor founder shares or anchor private placement warrants if it does not pay the $1,000,000 purchase
price; (ii) PSAM will forfeit, for no additional consideration or refund, 75% of the anchor founder shares and 75% of the anchor private
placement warrants it has purchased if it does not also purchase 9.9% of the units in our offering (without regard to the exercise of
the over-allotment option), or if it purchases such units but sells units or public shares or redeems public shares prior to or in connection
with the completion of our initial business combination such that it no longer holds public shares equal in number to at least 9.9% of
the number of units sold in our offering (without regard to the exercise of the over-allotment option). Following the completion of our
initial business combination, the anchor founder shares and the anchor private placement warrants, respectively, will be subject to the
same lock-up restrictions as all other founder shares and private placement warrants, respectively. Following the completion of our initial
business combination, PSAM’s public shares will be subject to a lock-up restricting their sale or other transfer, such that 50%
of such shares will become freely tradable (subject to applicable securities laws) after 30 days and the remaining 50% of such shares
will become freely tradable (subject to applicable securities laws) after 90 days. If PSAM does not sell units or public shares or redeem
public shares such that it holds a lesser number of public shares than 9.9% of the number of units sold in our offering and complies with
the post-business combination lock-ups, then our sponsor will thereafter extend to PSAM a right of first refusal to participate on substantially
similar terms in our sponsor’s next special purpose acquisition company (if any) and, if PSAM similarly invests and holds in any
such second special purpose acquisition company, then our sponsor will extend to PSAM a right of first refusal to participate on substantially
similar terms in our sponsor’s next special purpose acquisition company thereafter (if any).
PSAM has not been granted any additional stockholder
or other rights, and through its membership interests in our sponsor will have no right to control our sponsor or vote or dispose of any
founder shares (which will continue to be held and voted by our sponsor until after our initial business combination). In addition, PSAM
is not required to vote any of its public shares in favor of our initial business combination or for or against any other matter presented
for a stockholder vote. Nevertheless, purchases by PSAM of units in our offering, or of our securities in the open market after the completion
of our offering, or both, could potentially allow PSAM to control a sufficient number of public shares to influence the conduct of our
business, including with respect to a business combination. No assurance can be given as to the amount of securities PSAM may retain or
purchase in the open market following our offering.
NOTE 7. COMMITMENTS
Registration Rights
Pursuant to a registration rights agreement entered
into on January 28, 2021, the holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion
of Working Capital Loans (and any Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants
that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares) will have registration rights to
require the Company to register a sale of any of the securities held by them. The holders of these securities will be entitled to make
up to three demands, excluding short form registration demands, that the Company register such securities for sale under the Securities
Act. In addition, these holders will have “piggy-back” registration rights to include their securities in other registration
statements filed by the Company, subject to certain limitations. The registration rights agreement does not contain liquidated damages
or other cash settlement provisions resulting from delays in registering our securities. The Company will bear the expenses incurred in
connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters are entitled to a deferred fee
of $0.35 per Unit, or $8,050,000 in the aggregate, of which $6.9 million is deferred and held in the Trust Account and $1.15 million was
used to purchase warrants in connection with our offering. The deferred fee will become payable to the underwriters from the amounts held
in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
NOTE 8. 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 designation, rights and preferences
as may be determined from time to time by the Company’s board of directors. At September 30, 2021 and December 31, 2020, there were
no shares of preferred stock issued or outstanding.
Class A
Common Stock — The
Company is authorized to issue 300,000,000 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 September 30, 2021, there were 23,000,000 shares of Class A common stock
issued and outstanding subject to possible redemption which are presented as temporary equity. At December 31, 2020, there were no shares
of Class A common stock issued or outstanding.
Class B Common Stock —
The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001 per share. At September
30, 2021 and December 31, 2020, there were 5,750,000 shares of Class B common stock issued and outstanding.
Holders of Class A common stock and holders
of Class B common stock will vote together as a single class on all matters submitted to a vote of our stockholders except as otherwise
required by law.
The shares of Class B common stock will automatically
convert into Class A common stock at the time of a Business Combination, or earlier at the option of the holder, on a one-for-one
basis, subject to adjustment. In the case that additional shares of Class A common stock or equity-linked securities are issued or
deemed issued in connection with a Business Combination, the number of shares of Class A common stock issuable upon conversion of
all Founder Shares will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common
stock outstanding upon the completion of the Initial Public Offering, plus 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 exercisable for or convertible into shares of Class A common stock issued, or to be issued, to any seller
in the a Business Combination and any private placement-equivalent warrants issued to the Sponsor, officers or directors upon conversion
of Working Capital Loans; provided that such conversion of Founder Shares will never occur on a less than one for one basis.
NOTE 9. WARRANT LIABILITIES
As of September 30, 2021, there were 7,666,667
Public Warrants outstanding. As of December 31, 2020, there were no 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) 30 days after the completion of a Business Combination and (b) 12 months from
the closing of the Initial Public Offering. The Public Warrants will expire five years after the completion of a Business Combination
or earlier upon redemption or liquidation.
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 covering the issuance of the shares of Class A common stock underlying the
warrants is then effective and a 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 shares of Class A common stock upon
exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to
be exempt under the securities laws of the state of residence of the registered holder of the warrants.
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 best efforts to file with the
SEC a registration statement registering the issuance of the shares of Class A common stock issuable upon exercise of the warrants,
to cause such registration statement to become effective and to maintain a current prospectus relating to those shares of Class A
common stock until the warrants expire or are redeemed, as specified in 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 or within a specified period following the consummation of a Business Combination, warrant holders
may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain
an effective registration statement, exercise warrants on a “cashless basis” pursuant to the exemption provided by Section 3(a)(9)
of the Securities Act; provided that such exemption is available. If that exemption, or another exemption, is not available, holders will
not be able to exercise their warrants on a cashless basis.
Redemption of Warrants 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 Public Warrants:
|
●
|
in whole and not in part;
|
|
●
|
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) on the trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.
|
If and when the warrants become redeemable by
the Company, the Company may exercise its redemption right even if it 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, and only if the Private Placement Warrants are simultaneously redeemed;
|
|
●
|
at a price of $0.01 per warrant;
|
|
●
|
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 shares of Class A common stock;
|
|
●
|
if,
and only if, the closing price of the Class A common stock equals or exceeds $10.00 per public share (as adjusted) on the trading
day prior to the date on which the Company sends the notice of redemption to the warrant holders.
|
The exercise price and number of Class A
common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share
dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the
Public Warrants will not be adjusted for issuances of Class A common stock at a price below its exercise price. Additionally, in
no event will the Company be required to net cash settle the Public 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 Public Warrants will not receive
any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside
of the Trust Account with respect to such Public Warrants. Accordingly, the Public 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 its initial
Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue
price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance
to the 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 the Company’s initial Business Combination
on the date of the consummation of such initial Business Combination (net of redemptions), and (z) the volume weighted average trading
price of the Company’s common stock during the 20 trading day period starting on the trading day prior to the day on which the Company
consummates its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price
of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price
and the $18.00 per share redemption trigger price described above 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 described above will be adjusted (to
the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
As of September 30, 2021, there were 4,733,333
Private Placement Warrants outstanding. As of December 31, 2020, no warrants were outstanding. 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 Class A
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. Additionally, the Private Placement Warrants will
be exercisable on a cashless basis and be non-redeemable, except as described above, so long as they are held by the initial purchasers
or their permitted transferees. 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 and exercisable by such holders on the same basis as the
Public Warrants.
NOTE 10. 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.
|
At September 30, 2021, assets held in the Trust
Account was comprised of $230,029,159 in money market funds invested in U.S. Treasury securities. During the three and nine months ended
September 30, 2021, the Company did not withdraw any interest income from the Trust Account.
The following table presents information about
the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2021 and indicates the
fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
|
|
Level
|
|
September 30,
2021
|
|
Assets:
|
|
|
|
|
|
Money Market Funds
|
|
1
|
|
$
|
230,029,159
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
Warrant Liability – Public Warrants
|
|
1
|
|
|
4,906,667
|
|
Warrant Liability – Private Placement Warrants
|
|
3
|
|
|
3,029,333
|
|
The Warrants were accounted for as liabilities
in accordance with ASC 815-40 and are presented within warrant liabilities on our accompanying September 30, 2021 condensed balance sheet.
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 statement of operations.
The Private Placement Warrants were valued using
a Black Scholes Option Pricing Model, which is considered to be a Level 3 fair value measurement. The Modified Black Scholes model’s
primary unobservable input utilized in determining the fair value of the Private Placement Warrants is the expected volatility of the
common stock. The expected volatility as of the Initial Public Offering date was derived from observable public warrant pricing on comparable
‘blank-check’ companies without an identified target. The Public Warrants were initially valued using a Monte Carlo simulation
approach. For periods subsequent to the detachment of the warrants from the Units, the closing trading price for the public warrants was
used as the fair value of the Public Warrants.
The key inputs into the Black Scholes model and
the Monte Carlo Simulation for the warrants were as follows:
Input
|
|
September 30,
2021
|
|
Market price
|
|
$
|
9.74
|
|
Risk-free interest rate
|
|
|
1.07
|
%
|
Dividend yield
|
|
|
0.00
|
%
|
Effective volatility
|
|
|
11.56
|
%
|
Exercise price
|
|
$
|
11.50
|
|
Time to expiration
|
|
|
5.42
|
|
The following table presents the changes in the
fair value of warrant liabilities using Level 3 fair value measurements:
|
|
Private
Placement
Warrants
|
|
|
Public
Warrants
|
|
|
Warrant
Liabilities
|
|
Fair value as of January 1, 2021
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Initial measurement on February 2, 2021
|
|
|
5,396,000
|
|
|
|
8,433,334
|
|
|
|
13,829,334
|
|
Change in fair value
|
|
|
(2,366,667
|
)
|
|
|
(2,913,334
|
)
|
|
|
(5,280,001
|
)
|
Transfer to Level 1
|
|
|
—
|
|
|
|
(5,520,000
|
)
|
|
|
(5,520,000
|
)
|
Fair value as of September 30, 2021
|
|
$
|
3,029,333
|
|
|
|
—
|
|
|
|
3,029,333
|
|
Transfers to/from Levels 1, 2 and 3 are recognized
at the end of the reporting period in which a change in valuation technique or methodology occurs. The estimated fair value of the public
warrants transferring from a Level 3 measurement to a Level 1 fair value measurement during the three and nine months ended September
30, 2021 was approximately $5.5 million.
NOTE 11. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions
that occurred after the balance sheet date up to the date that the condensed 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 condensed financial statements.