UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For
the quarterly period ended
or
For the transition period from to
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| ||
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Units, each consisting of one share of Class A Common Stock and one-third of one Warrant | DNZ.U | The New York Stock Exchange | ||
| The | ||||
| Warrants, each whole warrant exercisable for one share of Class A Common Stock at an exercise price of $11.50 | DNZ WS | The New York Stock Exchange |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As
of November 7, 2022, there were
D AND Z MEDIA ACQUISITION CORP.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2022
TABLE OF CONTENTS
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
D AND Z MEDIA ACQUISITION CORP.
CONDENSED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (unaudited) | (audited) | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Prepaid expenses, net of current portion | ||||||||
| Marketable securities held in Trust Account | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND CLASS A COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION AND STOCKHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Total current liabilities | ||||||||
| Convertible promissory note - related party | ||||||||
| Income tax payable | ||||||||
| Deferred underwriting fee payable | ||||||||
| Warrant liability | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments (Note 7) | ||||||||
| Class A common stock subject to possible redemption, | ||||||||
| Stockholders’ equity (deficit): | ||||||||
| Preferred stock, $ | ||||||||
| Class A common stock, $ | ||||||||
| Class B common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND CLASS A COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
See
accompanying notes to unaudited condensed financial statements.
1
D AND Z MEDIA ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Formation and operating costs | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (loss) | ||||||||||||||||
| Change in fair value of convertible promissory note - related party | ||||||||||||||||
| Change in warrant liability | ( | ) | ||||||||||||||
| Interest income | ||||||||||||||||
| Total other income (loss) | ( | ) | ||||||||||||||
| Net income (loss) before income taxes | ( | ) | ||||||||||||||
| Income tax expense | ( | ) | ( | ) | ||||||||||||
| Net income (loss) allocable to common stockholders | $ | $ | $ | $ | ( | ) | ||||||||||
| $ | $ | $ | $ | ( | ) | |||||||||||
| $ | $ | $ | $ | ( | ) | |||||||||||
See
accompanying notes to unaudited condensed financial statements.
2
D AND Z MEDIA ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
NINE MONTHS ENDED SEPTEMBER 30, 2022
| Total | ||||||||||||||||||||
| Common Stock Class B | Additional Paid-in | Accumulated | Stockholders’ Equity | |||||||||||||||||
| Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||
| Balance - December 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Executive compensation | - | - | ||||||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance - March 31, 2022 (unaudited) | ( | ) | ( | ) | ||||||||||||||||
| Executive compensation | - | - | ||||||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance - June 30, 2022 (unaudited) | ( | ) | ( | ) | ||||||||||||||||
| Executive compensation | - | - | ||||||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance - September 30, 2022 (unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
NINE MONTHS ENDED SEPTEMBER 30, 2021
| Total | ||||||||||||||||||||
| Common Stock Class B | Additional Paid-in | Accumulated | Stockholders’ Equity | |||||||||||||||||
| Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||
| Balance - December 31, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Accretion for Class A common stock to redemption amount | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Executive compensation | - | - | ||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance - March 31, 2021 (unaudited) | ( | ) | ( | ) | ||||||||||||||||
| Executive compensation | - | - | ||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance - June 30, 2021 (unaudited) | ( | ) | ( | ) | ||||||||||||||||
| Executive compensation | - | - | ||||||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance - September 30, 2021 (unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
See accompanying notes to unaudited condensed financial statements.
3
D AND Z MEDIA ACQUISITION CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Change in fair value of convertible promissory note - related party | ( | ) | ||||||
| Change in warrant liability | ( | ) | ||||||
| Interest income earned on investment held in Trust Account | ( | ) | ( | ) | ||||
| Executive compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Income tax payable | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Cash deposited into Trust Account | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from sale of Units in Public Offering | ||||||||
| Proceeds from sale of Private Placement Warrants | ||||||||
| Proceeds of working capital loan | ||||||||
| Proceeds of promissory note - related party | ||||||||
| Payment of promissory note - related party | ( | ) | ||||||
| Payment of offering costs | ( | ) | ||||||
| Funds withdrawn from Trust Account for franchise taxes | ||||||||
| Net cash provided by financing activities | ||||||||
| NET (DECREASE) INCREASE IN CASH | ( | ) | ||||||
| CASH BEGINNING OF PERIOD | ||||||||
| CASH END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES: | ||||||||
| Deferred underwriting commission charged to additional paid-in capital | $ | $ | ||||||
| Initial classification of common stock subject to possible redemption | $ | $ | ||||||
See accompanying notes to unaudited condensed financial statements.
4
D and
Z Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1—Description of Organization and Business Operations
D and Z Media Acquisition Corp. (the “Company”) was incorporated in Delaware on October 7, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). Although the Company is not limited to a particular industry or sector for purposes of consummating a Business Combination, the Company intends to focus its search for a target business in the media and education technology (ed-tech) sectors. The Company is an emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.
As of September 30, 2022 and December 31, 2021, the Company had not commenced any operations. All activity through September 30, 2022 relates to the Company’s formation and the initial public offering (“IPO”) described below and since completion of the IPO, searching for a target with which to consummate a Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO. The Company has selected December 31st as its fiscal year end.
The Company’s sponsor is D and Z Media Holdings LLC, a Delaware limited liability company (the “Sponsor”).
Initial Public Offering
On
January 28, 2021, the Company consummated the IPO, including the full over-allotment option exercised by the underwriters on January
26, 2021, of
Initial Business Combination
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale
of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating
a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company
must complete a Business Combination having an aggregate fair market value of at least
The
Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem
all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting
called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder
approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders
will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially $
The
Company will proceed with a Business Combination if the Company has net tangible assets of at least $
5
D and
Z Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1—Description of Organization and Business Operations - Continued
Notwithstanding
the above, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender
offer rules, the Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of
such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section
13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares
with respect to more than an aggregate of
The
Company’s initial stockholders, officers and directors have agreed (i) to waive their redemption rights with respect to the Founder
Shares and Public Shares held by them in connection with the completion of a Business Combination, (ii) not to propose an amendment to
the Company’s Amended and Restated Certificate of Incorporation that would modify the substance or timing of the Company’s
obligation to redeem
The Company will have until January 28, 2023 to
consummate a Business Combination (as such period may be extended pursuant to the Amended and Restated Certificate of Incorporation, the
“Combination Period”). If the Company is unable to complete a Business Combination within the Combination Period, the Company
will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business
days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the
Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay taxes
(less up to $
The
Company’s initial stockholders, officers and directors agreed to waive their right to liquidating distributions from the Trust
Account with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However,
if the Company’s initial stockholders, officers or directors acquire Public Shares in or after the IPO, such Public Shares will
be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination
Period. The underwriters have agreed to waive their rights to their deferred underwriting commissions (see Note 6) held in the Trust
Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts
will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In
the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less
than the IPO price per Unit ($
In
order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims
by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered
into a written letter of intent, confidentiality or similar agreement, reduce the amount of funds in the Trust Account to below the lesser
of (i) $
6
D and
Z Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 2—Significant Accounting Policies
Risks and Uncertainties
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak on the Company’s financial position will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s financial position may be materially adversely affected. Additionally, the Company’s ability to complete an initial Business Combination may be materially adversely affected due to significant governmental measures being implemented to contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit the Company’s ability to have meetings with potential investors or affect the ability of a potential target company’s personnel, vendors and service providers to negotiate and consummate an initial Business Combination in a timely manner. The Company’s ability to consummate an initial Business Combination may also be dependent on the ability to raise additional equity and debt financing, which may be impacted by the COVID-19 outbreak and the resulting market downturn. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis of Presentation
The accompanying condensed financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC, and reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for the fair presentation of the financial position as of September 30, 2022 and the results of operations and cash flows for the period presented and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The financial information as of December 31, 2021 is derived from the audited financial statements presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The interim results for the nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
Liquidity, Capital Resources and Going Concern
As
of September 30, 2022, the Company had $
On
September 28, 2021, the Company issued an unsecured promissory note to the Sponsor, whereby the Sponsor has agreed to loan up to $
Until consummation of its Business Combination, the Company will be using the funds not held in the Trust Account, and any additional Working Capital Loans (as defined in Note 5) for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the Business Combination.
7
D and
Z Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 2—Significant Accounting Policies - Continued
To complete a Business Combination, the Company may need to raise additional capital through loans or additional investments from the Sponsor, the Company’s officers or directors or third parties. Other than the Sponsor Working Capital Loan described above, the Company cannot provide assurance that new financing will be available to it on commercially acceptable terms, if at all. Additionally, the Company has until January 28, 2023 to consummate a Business Combination, subject to the approval and implementation of the Proposed Extension. It is uncertain that the Company will be able to consummate a Business Combination by this time or that the Proposed Extension will be approved and implemented. If the Company does not consummate a Business Combination by such date and an extension has not been approved by the Company’s stockholders, there will be a mandatory liquidation and subsequent dissolution of the Company. These conditions raise substantial doubt about the Company’s ability to continue as a going concern through one year from the date of these condensed financial statements if a Business Combination is not consummated. These condensed financial statements do not include any adjustments relating to the recovery of the recorded assets or classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash and cash equivalents. The Company did not have any cash equivalents as of September 30, 2022 and December 31, 2021.
Marketable Securities Held in Trust Account
At
September 30, 2022, the assets held in the Trust Account were held in money market funds which invest in U.S. Treasury securities. During
the nine months ended September 30, 2022 the Company withdrew $
Fair Value Measurements
Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 820 “Fair Value Measurements and Disclosures” (“ASC 820”) defines fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the buyer and the seller at the measurement date. In determining fair value, the valuation techniques consistent with the market approach, income approach and cost approach shall be used to measure fair value. ASC 820 establishes a fair value hierarchy for inputs, which represent the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable and unobservable inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs that the buyer and seller would use in pricing the asset or liability developed based on the best information available in the circumstances.
The fair value hierarchy is categorized into three levels based on the inputs as follows:
Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.
Level 2 – Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets and liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means.
Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
The fair value of the Company’s certain assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet as of September 30, 2022 and the balance sheet as of December 31, 2021. The fair values of cash and cash equivalents, prepaid assets, accounts payable and accrued expenses are estimated to approximate the carrying values as of September 30, 2022 and December 31, 2021 due to the short maturities of such instruments.
8
D and
Z Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 2—Significant Accounting Policies - Continued
| Fair Value Measured as of September 30, 2022 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| U.S. Treasury Securities held in Trust Account | $ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Liabilities: | ||||||||||||||||
| Private stock warrant liabilities | $ | $ | $ | $ | ||||||||||||
| Convertible promissory note – related party | ||||||||||||||||
| Public stock warrant liabilities | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Fair Value Measured as of December 31, 2021 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| U.S. Treasury Securities held in Trust Account | $ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Liabilities: | ||||||||||||||||
| Private stock warrant liabilities | $ | $ | $ | $ | ||||||||||||
| Convertible promissory note – related party | ||||||||||||||||
| Public stock warrant liabilities | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Warrants
The Warrants are accounted for as liabilities pursuant to FASB ASC Topic 815-40, Derivatives and Hedging, Contracts in Entity’s Own Equity (“ASC 815-40”) and are measured at fair value as of each reporting period. Changes in the fair value of the Warrants are recorded in the statement of operations each period.
As of September 30, 2022 and December 31, 2021, the estimated fair value of the Public Warrants was determined by their public trading price and the estimated fair value of the Private Placement Warrants was determined using a Modified Black-Scholes valuation model using Level 3 inputs. Significant inputs to the valuation are as follows:
| As of September 30, 2022 | As of December 31, 2021 | |||||||
| Exercise price | $ | $ | ||||||
| Stock price | ||||||||
| Volatility | % | % | ||||||
| Term | ||||||||
| Risk-free rate | % | % | ||||||
| Dividend yield | % | % | ||||||
9
D and
Z Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 2—Significant Accounting Policies - Continued
Convertible Promissory Note – Related Party
The Company utilizes a compound option valuation model to estimate fair value of the convertible promissory note at each reporting period with changes recognized in the statements of operations. Significant inputs to the valuation are as follows:
| As of September 30, 2022 | As of December 31, 2021 | |||||||
| Conversion price | $ | $ | ||||||
| Private warrant price | ||||||||
| Volatility | % | % | ||||||
| Term | ||||||||
| Risk-free rate | % | % | ||||||
| Dividend yield | % | % | ||||||
| Number of steps | ||||||||
The following table presents a summary of the changes in the fair value of the convertible promissory note – related party and Private Placement Warrants, Level 3 liabilities, measured on a recurring basis as of September 30, 2022 and December 31, 2021:
| Convertible promissory note and private placement warrant liabilities at December 31, 2021 | $ | |||
| Change in fair value of convertible promissory note – related party | ( | ) | ||
| Change in fair value of warrant liabilities | ( | ) | ||
| Convertible promissory note and private placement warrant liabilities at September 30, 2022 | $ | |||
| Convertible promissory note and private placement warrant liabilities at December 31, 2020 | $ | |||
| Issuance of private warrants | ||||
| Proceeds received through convertible promissory note – related party | ||||
| Change in fair value of convertible promissory note – related party | ( |
) | ||
| Change in fair value of warrant liabilities | ( |
) | ||
| Convertible promissory note and private placement warrant liabilities at December 31, 2021 | $ |
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times, may exceed the Federal Depository Insurance Coverage limit of $
Derivative warrant liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The
Convertible Promissory Note – Related Party
The Company accounts for the convertible promissory note under ASC 815, Derivatives and Hedging (“ASC 815”). Under 815-15-25, the election can be made at the inception of a financial instrument to account for the instrument under the fair value option under ASC 825. The Company has made such election for the convertible promissory note. Using the fair value option, the convertible promissory note is required to be recorded at its initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the note are recognized as non-cash gains or losses in the statements of operations.
10
D and
Z Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 2—Significant Accounting Policies - Continued
Common Stock Subject to Possible Redemption
The
Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing
Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) is classified as a liability instrument
and measured at fair value. Conditionally redeemable Class A common stock (including common stock shares that feature redemption rights
that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the
Company’s control) is classified as temporary equity. At all other times, shares of common stock are classified as stockholders’
equity. The Company’s common stock shares feature certain redemption rights that are considered to be outside of the Company’s
control and subject to the occurrence of uncertain future events. Accordingly, as of September 30, 2022 and December 31, 2021,
At September 30, 2022 and December 31, 2021, the Class A common stock subject to possible redemption reflected in the balance sheet is reconciled in the following table:
| Gross proceeds | $ | |||
| Less: | ||||
| Common stock issuance costs | ( | ) | ||
| Derivative public warrant liability | ( | ) | ||
| Plus: | ||||
| Fair value adjustment of carrying value to redemption value | ||||
| Class A common stock subject to possible redemption | $ |
Offering Costs
The
Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A-“Expenses
of Offering”. Offering costs consist principally of professional and registration fees incurred through the balance sheet date
that are related to the IPO and were charged to stockholders’ equity upon the completion of the IPO. Accordingly, as of September
30, 2022 and December 31, 2021, offering costs in the aggregate of $
Use of Estimates
The preparation of the condensed financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities during the reporting period. Actual results could differ from those estimates.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
The Financial Accounting Standards Board (“FASB”) ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2022 and December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
The Company may be subject to potential examination
by federal, state and city taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing
and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal, state and city tax laws. The
Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve
months. The Company’s effective tax rate was
11
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Z Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 2—Significant Accounting Policies - Continued
Net income (loss) Per Common Stock Shares
The
Company applies the two-class method in calculating net loss per common stock share. The contractual formula utilized to calculate the
redemption amount approximates fair value. The Class feature to redeem at fair value means that there is effectively only one class of
stock. Changes in fair value are not considered a dividend of the purposes of the numerator in the earnings per share calculation. Net
loss per common stock share is computed by dividing the pro rata net loss between the Class A common stock and the Class B common stock
by the weighted average number of common stock outstanding for each of the periods. The calculation of diluted loss per common stock
does not consider the effect of the Warrants sold in the IPO and private placement since the exercise of such Warrants is contingent
upon the occurrence of future events and the inclusion of such Warrants would be anti-dilutive. The Warrants are exercisable for
| Nine Months Ended September 30, 2022 | Nine Months Ended September 30, 2021 | |||||||
| Class A Common Stock | ||||||||
| Numerator: Earnings allocable to Redeemable Class A Common Stock | ||||||||
| Net income (loss) allocable to Class A Common Stock subject to possible redemption | $ | $ | ( | ) | ||||
| Denominator: Weighted Average Class A Common Stock | ||||||||
| $ | $ | ( | ) | |||||
| Non-redeemable common stock | ||||||||
| Numerator: Net Loss minus Net Earnings | ||||||||
| Net income (loss) allocable to non-redeemable common stock | $ | $ | ( | ) | ||||
| Denominator: Weighted Average non-redeemable common stock | ||||||||
| $ | $ | ( | ) | |||||
12
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NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 2—Significant Accounting Policies - Continued
| Three Months Ended September 30, 2022 | Three Months Ended September 30, 2021 | |||||||
| Class A Common Stock | ||||||||
| Numerator: Earnings allocable to Redeemable Class A Common Stock | ||||||||
| Net income allocable to Class A Common Stock subject to possible redemption | $ | $ | ||||||
| Denominator: Weighted Average Class A Common Stock | ||||||||
| $ | $ | |||||||
| Non-redeemable common stock | ||||||||
| Numerator: Net Loss minus Net Earnings | ||||||||
| Net income allocable to non-redeemable common stock | $ | $ | ||||||
| Denominator: Weighted Average non-redeemable common stock | ||||||||
| $ | $ | |||||||
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company adopted ASU 2020-06 effective January 1, 2022. The adoption of ASU 2020-06 did not have an impact on the Company’s financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.
Note 3—Initial Public Offering
Pursuant
to the IPO, the Company sold
Note 4—Private Placement
Simultaneously
with the closing of the IPO, the Sponsor and Loop purchased
Each Private Placement Warrant is identical to the Public Warrants underlying the Units sold in the IPO, except that (1) the Private Placement Warrants and the shares of Class A common stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions, (2) the Private Placement Warrants are non-redeemable, (3) the Private Placement Warrants may be exercised by the holders on a cashless basis and (4) the holders of the Private Placement Warrants (including with respect to the shares of Class A common stock issuable upon exercise of the Private Placement Warrants) are entitled to registration rights. If the Private Placement Warrants are held by someone other than the Sponsor, Loop or their permitted transferees, the Private Placement Warrants will be redeemable by the Company in all redemption scenarios and exercisable by such holders on the same basis as the Public Warrants. In addition, the Private Placement Warrants held by Loop may not be exercised after January 25, 2026.
13
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Z Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 5—Related Party Transactions
Founder Shares
On
October 19, 2020, the Sponsor subscribed to purchase
The initial stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Related Party Loans
On
October 19, 2020, the Sponsor agreed to loan the Company an aggregate of up to $
In
addition, in order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor
or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company
funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company may repay
the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would
be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may
use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account
would be used to repay the Working Capital Loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination
or, at the lender’s discretion, up to $
On
September 28, 2021, the Company issued an unsecured promissory note to the Sponsor, whereby the Sponsor has agreed to loan up to $
Service and Administrative Fees
The
Company had agreed, commencing on January 26, 2021, to pay the Sponsor a total of $
Services Agreement
In
February 2021, the Sponsor entered into a Strategic Services Agreement (the “Services Agreement”) with the Company’s
Chief Financial Officer (CFO) to provide services to the Company.
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Z Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 5—Related Party Transactions - Continued
In
accordance with SEC SAB 5T, “Accounting for Expenses or Liabilities Paid by Principal Stockholder,” the Company recorded
a $
Note 6—Commitments & Contingencies
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any, and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares are entitled to registration rights pursuant to a registration rights agreement signed on January 25, 2021, the effective date of the IPO. These holders are entitled to certain demand and “piggyback” registration rights. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The
underwriters are also entitled to $
Note 7—Stockholders’ Equity
Preferred
Stock—The Company is authorized to issue
Class
A Common Stock—The Company is authorized to issue
Class
B Common Stock—The Company is authorized to issue
Stockholders
of record are entitled to
The shares of Class B common stock will automatically convert into Class A common stock concurrently with or immediately following the consummation of the initial Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment as described herein.
In
the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts
issued in the IPO and related to the closing of the initial Business Combination, the ratio at which shares of Class B common stock shall
convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the then-outstanding shares of Class
B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class
A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis,
15
D and
Z Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 8—Warrant Liabilities
Public
Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units
and only whole Public Warrants will trade. The Public Warrants will become exercisable 30 days after the completion of a Business Combination,
provided that the Company has an effective registration statement under the Securities Act covering the issuance of the shares of Class
A common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available and such shares are
registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder (or
the Company permits holders to exercise their Public Warrants on a cashless basis under the circumstances specified in the warrant agreement).
The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of the initial Business
Combination, the Company will use its best efforts to file, and within 60 business days following the initial Business Combination to
have declared effective, a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise
of the Warrants and to maintain a current prospectus relating to those shares of Class A common stock until the Warrants expire or are
redeemed; provided, that if the Class A common stock is at the time of any exercise of a Warrant not listed on a national securities
exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the
Company may, at its option, require holders of Public Warrants who exercise their Warrants to do so on a “cashless basis”
in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, it will not be required to file or
maintain in effect a registration statement, but it will be required to use its best efforts to register or qualify the shares under
applicable blue sky laws to the extent an exemption is not available. The Warrants will expire
The
Warrants have an exercise price of $
The Private Placement Warrants are identical to the Public Warrants, except that (1) the Private Placement Warrants and the shares of Class A common stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions, (2) the Private Placement Warrants are non-redeemable, (3) the Private Placement Warrants may be exercised by the holders on a cashless basis and (4) the holders of the Private Placement Warrants (including with respect to the shares of Class A common stock issuable upon exercise of the Private Placement Warrants) are entitled to registration rights. If the Private Placement Warrants are held by someone other than the Sponsor, Loop or their permitted transferees, the Private Placement Warrants will be redeemable by the Company in all redemption scenarios and exercisable by such holders on the same basis as the Public Warrants. In addition, the Private Placement Warrants held by Loop may not be exercised after January 25, 2026.
The Company may call the Public Warrants for redemption:
| ● | in whole and not in part; |
| ● | at a price of $0.01 per warrant; |
| ● | upon a minimum of 30 days’ prior written notice of redemption; and |
| ● | if, and only if, the last reported sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like and for certain issuances of Class A common stock and equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination) for any 20 trading days within the 30-trading day period ending on the third business day prior to the date on which the Company sends the notice of redemption to the warrant holders. |
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.
16
D and
Z Media Acquisition Corp.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 8—Warrant Liabilities - Continued
In no event will the Company be required to net cash settle any warrant. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Warrants will not receive any of such funds with respect to their Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such Warrants. Accordingly, the Warrants may expire worthless.
Note 9—Subsequent Events
The Company evaluated events that have occurred after the balance sheet date through the date on which the condensed financial statements were issued. Based upon this review, the Company did not identify any subsequent events, except as noted, that would have required adjustment or disclosure in the condensed financial statements.
On
October 5, 2022, the Company transferred $
On October 28, 2022, the Company filed with the SEC preliminary proxy materials with respect to a proposed special meeting of stockholders seeking approval of, among other matters, the Proposed Extension. The Company’s board of directors may determine at any time not to proceed with the Proposed Extension. There can be no assurance that definitive proxy materials will be filed and distributed to the Company’s stockholders as of the record date for such proposed meeting or, if the Proposed Extension and other related proposals are approved by the Company’s stockholders, that the Company’s board of directors will ultimately determine to implement the Proposed Extension. If the Proposed Extension is approved and implemented, public stockholders will be entitled to redeem their properly tendered Public Shares for a pro rata portion of the amount in the Trust Account, in accordance with the Amended and Restated Certificate of Incorporation.
17
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References in this Quarterly Report on Form 10-Q (this “Quarterly Report”) to “we,” “us,” “our” or the “Company” refer to D and Z Media Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to D and Z Media Holdings LLC. 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. 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 Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (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 this Quarterly Report and our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 12, 2022. 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 October 7, 2020 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 (“Business Combination”). We intend to effectuate our initial Business Combination using cash from the proceeds of our initial public offering (“Initial Public Offering”) and the private placement of the private placement warrants (the “Private Placement Warrants”) that occurred simultaneously with the consummation of our Initial Public Offering (the “Private Placement”), 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.
Recent Developments
On October 28, 2022, we filed with the SEC preliminary proxy materials with respect to a proposed special meeting of stockholders seeking approval of, among other matters, a proposal to extend the date by which we must consummate an initial Business Combination from January 28, 2023 to July 31, 2023 or such earlier date as determined by our board of directors (the “Proposed Extension”, and such later date, the “Proposed Extended Date”). Our board of directors may determine at any time not to proceed with the Proposed Extension. There can be no assurance that definitive proxy materials will be filed and distributed to our stockholders as of the record date for such proposed meeting or, if the Proposed Extension and other related proposals are approved by our stockholders, that our board of directors will ultimately determine to implement the Proposed Extension. If the Proposed Extension is approved and implemented, our public stockholders will be entitled to redeem their properly tendered public shares for a pro rata portion of the amount in the trust account established for the benefit of our public stockholders (the “Trust Account”), in accordance with our charter.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from inception through September 30, 2022 were organizational activities and those necessary to prepare for our Initial Public Offering, described below, and, since our Initial Public Offering, our activity has been limited to identifying a target company for our initial Business Combination. We do not expect to generate any operating revenues until after the completion of our initial Business Combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account. 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 in connection with searching for, and completing, our initial Business Combination.
For the three months ended September 30, 2022, we had a net income of $1,359,906, which consisted of operating costs of $593,460 and income tax expense of $253,751, offset by interest income on marketable securities held in the Trust Account of $1,173,526, change in fair value of convertible promissory note – related party totaling $5,758, change in warrant liability fair value of $1,027,833.
For the nine months ended September 30, 2022, we had a net income of $7,080,991, which consisted of operating costs of $2,391,640 and income tax expense of $253,751, offset by interest income on marketable securities held in the Trust Account of $1,541,928, change in fair value of convertible promissory note – related party totaling $108,621 and change in warrant liability fair value of $8,075,833.
18
For the three months ended September 30, 2021, we had a net income of $4,300,333, which consisted of operating costs of $356,477, offset by interest income on marketable securities held in the Trust Account of $2,977 and change in warrant liability fair value of $4,653,833.
For the nine months ended September 30, 2021, we had a net loss of $2,629,966, which consisted of operating costs of $2,250,788 and change in warrant liability fair value of $389,500, offset by interest income on marketable securities held in the Trust Account of $10,322.
Liquidity, Capital Resources and Going Concern
Until the consummation of our Initial Public Offering, our only source of liquidity was an initial purchase of shares of Class B common stock, par value $0.0001 per share (“Founder Shares”), by the Sponsor and loans from the Sponsor.
On January 28, 2021, we consummated our Initial Public Offering of 28,750,000 units (“Units”), including the issuance of 3,750,000 Units as a result of the underwriters’ full exercise of their over-allotment option, at $10.00 per Unit, generating total gross proceeds of $287,500,000. Simultaneously with the consummation of our Initial Public Offering, we consummated the Private Placement of an aggregate of 5,100,000 Private Placement Warrants to the Sponsor and Loop Capital Markets LLC (“Loop Capital”) at a price of $1.50 per Private Placement Warrant, generating total gross proceeds of $7,650,000.
Following our Initial Public Offering and the Private Placement, a total of $287,500,000 was placed in the Trust Account. We incurred $16,309,358 in transaction costs, consisting of $5,750,000 in cash underwriting fees, $10,062,500 of deferred underwriting fees and $496,858 of other offering costs.
For the nine months ended September 30, 2022, cash used in operating activities was $773,594. Net income of $7,080,991 was affected by change in fair value of warrant liability of $8,075,833, change in fair value of convertible promissory note – related party totaling $108,621, interest earned on marketable securities held in the Trust Account of $1,541,928, executive compensation of $270,000 and changes in operating assets and liabilities, which provided $1,601,797 of cash from operating activities.
For the nine months ended September 30, 2021, cash used in operating activities was $1,558,813. Net loss of $2,629,966 was affected by change in fair value of warrant liability of $389,500, interest earned on marketable securities held in the Trust Account of $10,322, executive compensation cost of $240,000 and changes in operating assets and liabilities, which provided $451,975 of cash from operating activities.
As of September 30, 2022, we had marketable securities held in the Trust Account of $288,779,092. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (excluding deferred underwriting commissions), to complete our initial Business Combination. We may withdraw interest to pay our taxes. To the extent that our equity or debt is used, in whole or in part, as consideration to complete our initial 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 September 30, 2022, we had cash held outside the Trust Account of $361,777. 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 our initial Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of our officers and directors may 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 the Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants identical to the Private Placement Warrants, at a price of $1.50 per warrant at the option of the lender.
On September 28, 2021, we issued an unsecured promissory note to the Sponsor, whereby the Sponsor has agreed to loan up to $1,000,000 to us for working capital needs (the “Sponsor Working Capital Loan”). The Sponsor Working Capital Loan accrues no interest on the unpaid principal balance. The Sponsor Working Capital Loan is due on the earlier of (i) the date on which we consummate our initial Business Combination and (ii) the date that our winding up is effective. At the discretion of the Sponsor, the Sponsor Working Capital Loan may be convertible into warrants of the post-Business Combination entity at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants. As of September 30, 2022, we had an outstanding balance of $650,000 under the Sponsor Working Capital Loan.
19
To complete our initial Business Combination, we may need to raise additional capital through loans or additional investments from the Sponsor, our officers or directors or third parties. Other than the Sponsor Working Capital Loan described above, we cannot provide assurance that new financing will be available to us on commercially acceptable terms, if at all. Additionally, we have until January 28, 2023 to consummate our initial Business Combination, subject to the approval and implementation of the Proposed Extension. It is uncertain that we will be able to consummate our initial Business Combination by this time or that the Proposed Extension will be approved and implemented. If we do not consummate our initial Business Combination by such date and an extension has not been approved by our stockholders, there will be a mandatory liquidation and subsequent dissolution of the Company. These conditions raise substantial doubt about our ability to continue as a going concern through one year from the date of the financial statements if our initial Business Combination is not consummated. The financial statements do not include any adjustments relating to the recovery of the recorded assets or classification of the liabilities that might be necessary should we be unable to continue as a going concern.
Moreover, we may need to obtain additional financing to complete our initial Business Combination because the transaction requires more cash than is available from the proceeds held in the Trust Account or because we become obligated to redeem a significant number of our public shares upon implementation of the Proposed Extension, if approved and implemented, or completion of our initial Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. If we are unable to complete our initial 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 initial 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 did not have any off-balance sheet arrangements as of September 30, 2022.
Contractual Obligations
Other than the Sponsor Working Capital Loan described above, we do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or other long-term liabilities. We had agreed, commencing on January 26, 2021, to pay the Sponsor a monthly fee of $15,000 for office space and secretarial and administrative services until the earlier of the completion of our initial Business Combination and our liquidation. On May 25, 2021, we agreed with the Sponsor to cease such agreement. The Sponsor is obligated to pay $30,000 per month to Mark Wiltamuth, our Chief Financial Officer, for his services prior to the consummation of our initial Business Combination until the earlier of the completion of our initial Business Combination and our liquidation, subject to the terms of an agreement between the Sponsor and Mr. Wiltamuth that was entered into after the consummation of our Initial Public Offering.
The underwriters of our Initial Public Offering are entitled to a deferred fee of $0.35 per Unit, or $10,062,500 in the aggregate. Subject to the terms of the underwriting agreement, (i) the deferred fee was placed in the Trust Account and will be released to the underwriters only upon the completion of our initial Business Combination and (ii) the deferred fee will be waived by the underwriters in the event that we do not complete our initial Business Combination.
Critical Accounting Policies and Estimates
The preparation of condensed 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:
Net income (loss) Per Common Stock Shares
We apply the two-class method in calculating net loss per common stock share. The contractual formula utilized to calculate the redemption amount approximates fair value. The Class feature to redeem at fair value means that there is effectively only one class of stock. Changes in fair value are not considered a dividend of the purposes of the numerator in the earnings per share calculation. Net loss per common stock share is computed by dividing the pro rata net loss between the Class A common stock and the Class B common stock by the weighted average number of common stock outstanding for each of the periods. The calculation of diluted loss per common stock does not consider the effect of the warrants sold in our Initial Public Offering and the Private Placement since the exercise of such warrants is contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. The warrants are exercisable for 14,683,333 shares of Class A common stock in the aggregate.
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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 (if any) is classified as a liability instrument and measured at fair value. Conditionally redeemable Class A common stock (including common stock shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, shares of common stock are classified as stockholders’ equity. Our common stock shares feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, as of September 30, 2022, 28,750,000 shares of Class A common stock subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders’ equity section of our balance sheet.
Public Warrants and Private Placement Warrants
We account for the public warrants and the Private Placement Warrants issued in connection with our Initial Public Offering in accordance with ASC Topic 815-40, Derivatives and Hedging, Contracts in Entity’s Own Equity, under which the warrants do not meet the criteria for equity classification and must be recorded as liabilities. As the warrants meet the definition of a derivative as contemplated in ASC 815, the warrants are measured at fair value at inception and at each reporting date in accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the statements of operations in the period of change.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. We adopted ASU 2020-06 effective January 1, 2022. 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 financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
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Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the fiscal quarter ended September 30, 2022. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that our disclosure controls and procedures were not effective as of September 30, 2022, due solely to the material weaknesses in our internal control over financial reporting related to our accounting for complex financial instruments, as described in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021 filed with the SEC on November 12, 2021. As a result, we performed additional analyses as deemed necessary to ensure that our financial statements were prepared in accordance with accounting principles generally accepted in the United States of America. Accordingly, management believes that the financial statements included in this Quarterly Report present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
Changes in Internal Control Over Financial Reporting
Except as set forth below, there was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter of 2022 covered by this Quarterly Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
While
we have processes to identify and appropriately apply applicable accounting requirements, in light of the material weaknesses identified
and the resulting restatements, our principal executive officer and principal financial and accounting officer performed additional accounting
and financial analyses related to the accounting for our complex financial instruments, including consulting with subject matter experts.
Management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation and improvement
of our internal control over financial reporting. We have enhanced and plan to continue to enhance our system of evaluating and implementing
the accounting standards that apply to our financial statements, including through enhanced analyses by our personnel and third-party
professionals with whom we consult regarding complex accounting applications. As we continue to evaluate and improve our financial reporting
process, we may take additional actions to modify certain of these remediation measures. We cannot assure you that the measures we have
taken to date, or any measures we may take in the future, will be sufficient to remediate the material weaknesses we have identified
or avoid potential future material weaknesses.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our Annual Report on Form 10-K filed with the SEC on April 12, 2022. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. Except as set forth below, as of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on April 12, 2022, except we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our initial Business Combination, and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments. In particular, we are required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete our initial Business Combination, and results of operations.
On March 30, 2022, the SEC issued proposed rules (the “SPAC Rule Proposals”) relating to, among other items, enhancing disclosures in business combination transactions involving special purpose acquisition companies (“SPACs”) and private operating companies; amending the financial statement requirements applicable to transactions involving shell companies; the potential liability of certain participants in proposed business combination transactions; and the extent to which SPACs could become subject to regulation under the Investment Company Act of 1940, as amended (the “Investment Company Act”). These rules, if adopted, whether in the form proposed or in revised form, may materially adversely affect our ability to negotiate and complete our initial Business Combination and may increase the costs and time related thereto.
Recent increases in inflation in the United States and elsewhere could make it more difficult for us to complete our initial Business Combination.
Recent increases in inflation in the United States and elsewhere may lead to increased price volatility for publicly traded securities, including ours, or other national, regional or international economic disruptions, any of which could make it more difficult for us to complete our initial Business Combination.
Were we considered to be a “foreign person,” we might not be able to complete an initial Business Combination with a U.S. target company if such initial Business Combination is subject to U.S. foreign investment regulations and review by a U.S. government entity such as the Committee on Foreign Investment in the United States (“CFIUS”), or ultimately prohibited.
Certain federally licensed businesses in the United States, such as broadcasters and airlines, may be subject to rules or regulations that limit foreign ownership. In addition, CFIUS is an interagency committee authorized to review certain transactions involving foreign investment in the United States by foreign persons in order to determine the effect of such transactions on the national security of the United States. Were we considered to be a “foreign person” under such rules and regulations, any proposed Business Combination between us and a U.S. business engaged in a regulated industry or which may affect national security could be subject to such foreign ownership restrictions and/or CFIUS review. The scope of CFIUS was expanded by the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”) to include certain non-controlling investments in sensitive U.S. businesses and certain acquisitions of real estate even with no underlying U.S. business. FIRRMA, and subsequent implementing regulations that are now in force, also subject certain categories of investments to mandatory filings. If a potential initial Business Combination with a U.S. business falls within the scope of foreign ownership restrictions, we may be unable to consummate an initial Business Combination with such business. In addition, if a potential initial Business Combination falls within CFIUS’s jurisdiction, we may be required to make a mandatory filing or determine to submit a voluntary notice to CFIUS, or to proceed with the initial Business Combination without notifying CFIUS and risk CFIUS intervention, before or after closing the initial Business Combination. The Sponsor is a U.S. entity, the managing member of the Sponsor is a U.S. entity and the sole manager of such managing member is a U.S. person. However, if CFIUS has jurisdiction over our initial Business Combination, CFIUS may decide to block or delay our initial Business Combination, impose conditions to mitigate national security concerns with respect to such initial Business Combination or order us to divest all or a portion of a U.S. business of the combined company if we had proceeded without first obtaining CFIUS clearance. If we were considered to be a “foreign person,” the foreign ownership limitations, and the potential impact of CFIUS, may limit the attractiveness of a transaction with us or prevent us from pursuing certain initial Business Combination opportunities that we believe would otherwise be beneficial to us and our stockholders. As a result, in such circumstances, the pool of potential targets with which we could complete an initial Business Combination could be limited and we may be adversely affected in terms of competing with other SPACs that do not have similar foreign ownership issues.
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Moreover, the process of government review, whether by CFIUS or otherwise, could be lengthy. Because we have only a limited time to complete our initial Business Combination, our failure to obtain any required approvals within the requisite time period may require us to liquidate. If we liquidate, our public stockholders may only receive $10.00 per share, and our warrants will expire worthless. This will also cause you to lose any potential investment opportunity in a target company and the chance of realizing future gains on your investment through any price appreciation in the combined company.
A new 1% U.S. federal excise tax could be imposed on us in connection with redemptions by us of our shares.
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases (including redemptions) of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out, and prevent the abuse or avoidance of, the excise tax.
Any redemption or other repurchase that occurs after December 31, 2022 may be subject to the excise tax, including in connection with our initial Business Combination, certain amendments to our charter or otherwise. Whether and to what extent we would be subject to the excise tax would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the initial Business Combination, certain amendments to our charter or otherwise, (ii) the structure of the initial Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with the initial Business Combination (or otherwise issued not in connection with the initial Business Combination but issued within the same taxable year of the initial Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by us, and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete our initial Business Combination and in our ability to complete our initial Business Combination.
If we are deemed to be an investment company for purposes of the Investment Company Act, we would be required to institute burdensome compliance requirements and our activities would be severely restricted and, as a result, we may abandon our efforts to consummate an initial Business Combination and liquidate.
On March 30, 2022, the SEC issued the SPAC Rule Proposals relating to, among other things, circumstances in which SPACs could potentially be subject to the Investment Company Act and the regulations thereunder. The SPAC Rule Proposals would provide a safe harbor for such companies from the definition of “investment company” under Section 3(a)(1)(A) of the Investment Company Act, provided that a SPAC satisfies certain criteria, including a limited time period to announce and complete a de-SPAC transaction. Specifically, to comply with the safe harbor, the SPAC Rule Proposals would require a company to file a Current Report on Form 8-K announcing that it has entered into an agreement with a target company for an initial business combination no later than 18 months after the effective date of its registration statement for its initial public offering (the “IPO Registration Statement”). The company would then be required to complete its initial business combination no later than 24 months after the effective date of the IPO Registration Statement.
There is currently uncertainty concerning the applicability of the Investment Company Act to a SPAC, including a company like ours, that has not entered into a definitive agreement within 18 months after the effective date of the IPO Registration Statement or that may not complete its initial business combination within 24 months after such date. We have not entered into a definitive initial Business Combination agreement within 18 months after the effective date of our IPO Registration Statement and may not complete our initial Business Combination within 24 months of such date. It is possible that a claim could be made that we have been operating as an unregistered investment company.
If we are deemed to be an investment company under the Investment Company Act, our activities would be severely restricted. In addition, we would be subject to burdensome compliance requirements. We do not believe that our principal activities will subject us to regulation as an investment company under the Investment Company Act. However, if we are deemed to be an investment company and subject to compliance with and regulation under the Investment Company Act, we would be subject to additional regulatory burdens and expenses for which we have not allotted funds. As a result, unless we are able to modify our activities so that we would not be deemed an investment company, we would expect to abandon our efforts to complete an initial Business Combination and instead to liquidate. If we are required to liquidate, our stockholders would not be able to realize the benefits of owning stock in a successor operating business, including the potential appreciation in the value of our stock and warrants following such a transaction, and our warrants would expire worthless.
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If we instruct the trustee to liquidate the securities held in the Trust Account and instead to hold the funds in the Trust Account in cash until the earlier of the consummation of an initial Business Combination or our liquidation, we may be able to mitigate the risk that we could be deemed to be an investment company for purposes of the Investment Company Act. Following the liquidation of securities in the Trust Account, we would likely receive minimal interest, if any, on the funds held in the Trust Account, which would reduce the dollar amount our public stockholders would receive upon any redemption or liquidation of the Company.
The funds in the Trust Account have, since our Initial Public Offering, been held only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act. However, to mitigate the risk of us being deemed to be an unregistered investment company (including under the subjective test of Section 3(a)(1)(A) of the Investment Company Act) and thus subject to regulation under the Investment Company Act, we may, at any time, on or prior to the 24-month anniversary of the effective date of the IPO Registration Statement, instruct the trustee with respect to the Trust Account to liquidate the U.S. government treasury obligations or money market funds held in the Trust Account and thereafter to hold all funds in the Trust Account in cash until the earlier of consummation of an initial Business Combination or liquidation of the Company. Following such liquidation of the securities held in the Trust Account, we would likely receive minimal interest, if any, on the funds held in the Trust Account. However, interest previously earned on the funds held in the Trust Account still may be released to us to pay our taxes, if any, and certain other expenses as permitted. As a result, any decision to liquidate the securities held in the Trust Account and thereafter to hold all funds in the Trust Account in cash would reduce the dollar amount our public stockholders would receive upon any redemption or liquidation of the Company.
In addition, even prior to the 24-month anniversary of the effective date of the IPO Registration Statement, we may be deemed to be an investment company. The longer that the funds in the Trust Account are held in short-term U.S. government treasury obligations or in money market funds invested exclusively in such securities, even prior to the 24-month anniversary, the greater the risk that we may be considered an unregistered investment company, in which case we may be required to liquidate the Company. Accordingly, we may determine, in our discretion, to liquidate the securities held in the Trust Account at any time, even prior to the 24-month anniversary, and instead hold all funds in the Trust Account in cash, which would further reduce the dollar amount our public stockholders would receive upon any redemption or liquidation of the Company. As of the date of this Quarterly Report, we have not yet made any such determination to liquidate the securities held in the Trust Account.
There are no assurances that the Proposed Extension, if approved and implemented, will enable us to complete an initial Business Combination.
Approving the Proposed Extension involves a number of risks. Even if the Proposed Extension and related proposals are approved and the Proposed Extension is implemented, we can provide no assurances that an initial Business Combination will be consummated prior to the Extended Date. Our ability to consummate any Business Combination is dependent on a variety of factors, many of which are beyond our control. If the Proposed Extension and related proposals are approved and the Proposed Extension is implemented, we expect to seek stockholder approval of an initial Business Combination. We are required to offer our public stockholders the opportunity to redeem their public shares in connection with the Proposed Extension, and we will be required to offer our public stockholders redemption rights again in connection with any stockholder vote to approve an initial Business Combination. Even if such proposals are approved and the Proposed Extension is implemented, or if an initial Business Combination is approved by our stockholders, it is possible that redemptions will leave us with insufficient cash to consummate an initial Business Combination on commercially acceptable terms, or at all. The fact that we will have separate redemption periods in connection with the implementation of the Proposed Extension and an initial Business Combination vote could exacerbate these risks. Other than in connection with a redemption offer or liquidation, our stockholders may be unable to recover their investment except through sales of our shares on the open market. The price of our shares may be volatile, and there can be no assurance that stockholders will be able to dispose of their shares at favorable prices, or at all.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On October 19, 2020, we issued 7,187,500 Founder Shares to the Sponsor for an aggregate purchase price of $25,000, or approximately $0.003 per share, pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. No underwriting discounts or commissions were paid with respect to such issuance. In December 2020, the Sponsor transferred an aggregate of 175,000 Founder Shares to certain of our independent directors and special advisors at their original purchase price. Subsequently, in January 2021, the Sponsor transferred an aggregate of 100,000 Founder Shares to Loop Capital at their original purchase price. The Founder Shares are automatically convertible into shares of Class A common stock, par value $0.0001 per share (“Class A Common Stock”), concurrently with or immediately following the consummation of our initial Business Combination on a one-for-one basis, subject to adjustment.
On January 28, 2021, we consummated our Initial Public Offering of 28,750,000 Units, including the issuance of 3,750,000 Units as a result of the underwriters’ full exercise of their over-allotment option, with each Unit consisting of one share of Class A Common Stock and one-third of one redeemable warrant, each whole warrant entitling the holder thereof to purchase one share of Class A Common Stock at an exercise price of $11.50 per share, subject to adjustment. Each whole warrant will become exercisable 30 days after the completion of our initial Business Combination and will expire five years after the completion of our initial Business Combination, or earlier upon redemption or liquidation. The Units were sold at an offering price of $10.00 per Unit, generating total gross proceeds of $287,500,000.
Goldman Sachs & Co. LLC acted as book running manager and Loop Capital acted as co-manager of our Initial Public Offering. The securities sold in our Initial Public Offering were registered under the Securities Act on a registration statement on Form S-1 (File No. 333-252000) (the “Registration Statement”). The SEC declared the Registration Statement effective on January 25, 2021.
Simultaneously with the consummation of our Initial Public Offering, we consummated the Private Placement of 4,915,217 and 184,783 Private Placement Warrants to the Sponsor and Loop Capital, respectively, or an aggregate of 5,100,000 Private Placement Warrants, at a price of $1.50 per Private Placement Warrant, generating total gross proceeds of $7,650,000. Such issuances were made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. No underwriting discounts or commissions were paid with respect to the Private Placement.
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The Private Placement Warrants are identical to the warrants underlying the Units sold in our Initial Public Offering, except that if held by the initial purchasers or their permitted transferees, they (i) may be exercised on a cashless basis, (ii) are not subject to redemption, and (iii) with respect to Private Placement Warrants held by Loop Capital, will not be exercisable after January 25, 2026. If the Private Placement Warrants are held by holders other than the initial purchasers or their permitted transferees, then the Private Placement Warrants will be redeemable by us and exercisable by the holders on the same basis as the warrants included in the Units sold in our Initial Public Offering. In addition, the Private Placement Warrants (and the shares of Class A Common Stock issuable upon exercise of such Private Placement Warrants) are not transferable, assignable or salable until 30 days after the completion of our initial Business Combination, subject to certain limited exceptions, and holders of the Private Placement Warrants (and the shares of Class A Common Stock issuable upon exercise of such Private Placement Warrants) are entitled to certain registration rights, as described in more detail in the Registration Statement.
We paid a total of $5,750,000 in underwriting discounts and commissions and $496,858 for other costs and expenses related to our Initial Public Offering. In addition, the underwriters of our Initial Public Offering agreed to defer $10,062,500 in underwriting discounts and commissions, which amount will be payable upon consummation of our initial Business Combination, if consummated. After deducting the underwriting discounts and commissions (excluding the deferred portion of $10,062,500 in underwriting discounts and commissions) and the offering expenses, the total net proceeds from our Initial Public Offering and the Private Placement was $288,903,142, of which $287,500,000 was placed in the Trust Account.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Quarterly Report.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report.
| * | Filed herewith. |
| ** | Furnished. |
| (1) | Previously filed as an exhibit to our Current Report on Form 8-K filed on January 29, 2021 and incorporated by reference herein. |
| (2) | Previously filed as an exhibit to our Registration Statement on Form S-1 filed on January 8, 2021 and incorporated by reference herein. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| D and z media acquisition corp. | ||
| Date: November 7, 2022 | By: | /s/ Betty Liu |
| Name: | Betty Liu | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: November 7, 2022 | By: | /s/ Mark Wiltamuth |
| Name: | Mark Wiltamuth | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
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