UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
For the transition period from to
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
(Address of principal executive offices, including zip code)
Registrant’s
telephone number, including area code:
Not
Applicable
(Former name or former address, 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 Redeemable Warrant | CLRMU | The | ||
| The Nasdaq Stock Market LLC | ||||
| Warrants, each exercisable for one share Class A Common Stock for $11.50 per share | CLRMW | The Nasdaq Stock Market LLC |
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):
As
of November 19, 2021, there were
CLARIM ACQUISITION CORP.
Quarterly Report on Form 10-Q
Table of Contents
i
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CLARIM ACQUISITION CORP.
CONDENSED BALANCE SHEETS
| September 30, 2021 | December 31, 2020 | |||||||
| Assets | ||||||||
| Current asset - cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Due from Sponsor | ||||||||
| Deferred offering costs | ||||||||
| Total current assets | ||||||||
| Prepaid expenses, non-current | ||||||||
| Cash and securities held in Trust Account | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accrued offering costs and expenses | $ | $ | ||||||
| Due to related party | ||||||||
| Promissory note - related party | ||||||||
| Total current liabilities | ||||||||
| Warrant liability | ||||||||
| Deferred legal and professional fee | ||||||||
| Deferred underwriting discount | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Class A common stock subject to possible redemption, | ||||||||
| Stockholders’ (Deficit) Equity: | ||||||||
| Preferred stock, $ | ||||||||
| Class A common stock, $ | ||||||||
| Class B common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ (deficit) equity | ( | ) | ||||||
| Total Liabilities and Stockholders’ (Deficit) Equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
CLARIM ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
| For the three months ended September 30, 2021 | For the nine months ended September 30, 2021 | |||||||
| Operating costs | $ | $ | ||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense) | ||||||||
| Trust interest income | ||||||||
| Bank interest income | ||||||||
| Warrant issuance costs | ( | ) | ||||||
| Unrealized gain (loss) on change in fair value of warrants | ||||||||
| Total other income | ||||||||
| Net income | $ | $ | ||||||
| Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption | ||||||||
| Basic and diluted net income per share, Class A common stock subject to possible redemption | $ | $ | ||||||
| Basic and diluted weighted average shares outstanding, Class B, non-redeemable common stock | ||||||||
| Basic and diluted net income per share, Class B, non-redeemable common stock | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
CLARIM ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
| Class A Common Stock |
Class B Common Stock |
Additional Paid-in |
Accumulated | Stockholders’ Equity |
||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance as of December 31, 2020 | $ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
| Sale of |
- | - | ||||||||||||||||||||||||||
| Remeasurement of Class A common stock under ASC 480-10-S99, restated | - | - | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance as of March 31, 2021, restated | ( |
) | ( |
) | ||||||||||||||||||||||||
| Net loss | - | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance as of June 30, 2021, restated | ( |
) | ( |
) | ||||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||||||
| Balance as of September 30, 2021 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
CLARIM ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
| For Nine Months Ended September 30, 2021 | ||||
| Cash flows from operating activities: | ||||
| Net income | $ | |||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||
| Warrant issuance costs | ||||
| Decrease in fair value of warrants | ( | ) | ||
| Interest earned on cash and marketable securities held in Trust Account | ( | ) | ||
| Changes in current assets and liabilities: | ||||
| Prepaid expenses | ( | ) | ||
| Deferred legal and professional fee | ||||
| Accrued offering costs and expenses | ||||
| Due to related party | ||||
| Net cash used in operating activities | ( | ) | ||
| Cash Flows from Investing Activities: | ||||
| Investment held in Trust Account | ( | ) | ||
| Net cash used in investing activities | ( | ) | ||
| Cash flows from financing activities: | ||||
| Proceeds from initial public offering, net of underwriters’ fees | ||||
| Proceeds from private placement warrants | ||||
| Repayment to promissory note to related party | ( | ) | ||
| Payments of offering costs | ( | ) | ||
| Net cash provided by financing activities | ||||
| Net change in cash | ||||
| Cash, beginning of the period | ||||
| Cash, end of the period | $ | |||
| Supplemental disclosures of noncash investing and financing activities | ||||
| Deferred underwriting commissions charged to additional paid in capital | $ | |||
| Remeasurement of Class A common stock under ASC 480-10-S99 | $ | |||
| Initial classification of warrant liability at issuance | $ | |||
| Deferred offering costs paid by Sponsor loan | $ | |||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
CLARIM ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1 - Organization and Business Operations
Organization and General
Clarim Acquisition Corp. (the “Company”) is a newly organized blank check company incorporated as a Delaware corporation on November 4, 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 (“Business Combination”). The Company has not selected any specific Business Combination target and the Company has not, nor has anyone on its behalf, initiated any substantive discussions, directly or indirectly, with any business combination target with respect to the Business Combination.
The Company has selected December 31 as its fiscal year end.
As of September 30, 2021, the Company had not commenced any operations. All activity for the period from November 4, 2020 (inception) through September 30, 2021 relates to the Company’s formation and the initial public offering (“IPO”), which is described below, and, since the closing of the IPO, the search for a prospective initial 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, incur reasonable business expenses to affect a business combination and will recognize changes in the fair value of warrant liability as other income (expense).
The Company’s sponsor is Clarim Partners, LLC, a Delaware limited liability company (the “Sponsor”).
Financing
The registration statement for the Company’s IPO was declared effective
on January 28, 2021 (the “Effective Date”). On February 2, 2021, the Company consummated the IPO of
Simultaneously with the closing of the IPO, the Company consummated
the sale of
Transaction costs amounted to $
Trust Account
Following the closing of the IPO on February 2, 2021, $
5
Initial Business Combination
The Company’s Business Combination must be with one or more target
businesses that together have a fair market value equal to at least
The Company will provide its public stockholders with the opportunity
to redeem all or a portion of their public shares upon the completion of the initial Business Combination either (i) in connection with
a stockholder meeting called to approve the initial Business Combination or (ii) without a stockholder vote by means of a tender offer.
The decision as to whether the Company will seek stockholder approval of a proposed initial Business Combination or conduct a tender offer
will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem their shares for a pro rata share of
the aggregate amount then on deposit in the Trust Account (initially approximately $
The shares of common stock subject to redemption will be recorded at
a redemption value and classified as temporary equity upon the completion of the IPO, in accordance with Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case, the Company will proceed with a Business
Combination if the Company has net tangible assets of at least $
If the Company is unable to complete its initial 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 its taxes (less up to $
The sponsor, officers and directors have agreed to (i) waive their
redemption rights with respect to their shares of the Company’s Class B common stock and shares of Class A common stock issued upon conversion
thereof (the “founder shares”) and public shares in connection with the completion of the initial Business Combination, (ii)
waive their redemption rights with respect to their founder shares and public shares in connection with a stockholder vote to approve
an amendment to the Company’s amended and restated certificate of incorporation (A) to modify the substance or timing of the Company’s
obligation to provide for the redemption of the public shares in connection with an initial Business Combination or to redeem
6
Liquidity and Capital Resources
As of September 30, 2021, the Company had approximately $
Prior to the completion of the Initial Public Offering, the Company’s
liquidity needs had been satisfied through a payment from the Sponsor of $
In addition, in order to finance transaction costs in connection with a Business Combination, the Company’s Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, provide the Company Working Capital Loans, as defined below (see Note 6). To date, there were no amounts outstanding under any Working Capital Loans.
The Company also subsequently entered into a promissory note with the
Sponsor on November 19, 2021 pursuant to which the Company may draw down capital to fund its working capital needs or in connection with
the initial business combination, up to a total principal amount in aggregate of up to $
Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Note 2 – Restatement of Previously Issued Financial Statements
In connection with the preparation of the
Company’s financial statements as of September 30, 2021, management determined it should restate its previously reported financial
statements. The Company previously determined common stock subject to possible redemption (“Public Shares”) to be equal to
the redemption value of $
In connection with the change in presentation for the Public Shares , the Company also revised its earnings per share calculation to allocate net income (loss) on a pro rata basis to Class A and Class B common stock. This presentation shows both classes of common stock share pro rata in the income (loss) of the Company.
In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements;” the Company evaluated the changes and has determined that the related impact was material to its previously presented financial statements. Therefore, the Company, in consultation with its Audit Committee, concluded that its previously issued financial statements as of February 2, 2021, March 31, 2021 and June 30, 2021 should be restated because of a misapplication in the guidance around complex accounting for financial instruments and should no longer be relied upon. The Company is reporting the restatements to those periods in this Quarterly Report.
7
Impact of the Restatement
The impact of the restatement on the Company’s financial statements is reflected in the following table.
| Balance Sheet as of February 2, 2021 (per Form 8-K filed on February 8, 2021) | As Previously Reported | Restatement Adjustment | As Restated | |||||||||
| Shares Subject to Redemption | $ | $ | $ | |||||||||
| Stockholders’ equity (deficit) | ||||||||||||
| Class A Common Stock | $ | $ | ( | ) | $ | |||||||
| Class B Common Stock | $ | $ | $ | |||||||||
| Additional Paid in Capital | $ | $ | ( | ) | $ | |||||||
| Accumulated Deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Total Stockholders’ Equity (Deficit) | $ | $ | ( | ) | $ | ( | ) | |||||
| Number of shares subject to redemption | ||||||||||||
| Balance Sheet as of March 31, 2021 (per Form 10-Q filed on May 24, 2021) | As Previously Reported | Restatement Adjustment | As Restated | |||||||||
| Shares Subject to Redemption | $ | $ | $ | |||||||||
| Stockholders’ equity (deficit) | ||||||||||||
| Class A Common Stock | $ | $ | ( |
) | $ | |||||||
| Class B Common Stock | $ | $ | $ | |||||||||
| Additional Paid in Capital | $ | $ | ( |
) | $ | |||||||
| Retained Earnings (Accumulated Deficit) | $ | $ | ( |
) | $ | ( |
) | |||||
| Total Stockholders’ Equity (Deficit) | $ | $ | ( |
) | $ | ( |
) | |||||
| Number of shares subject to redemption | ||||||||||||
| Statement of Changes in Stockholders’ (Deficit) Equity for the three months ended March 31, 2021 | As Previously Reported | Restatement Adjustment | As Restated | |||||||||
| Sale of |
$ | $ | ( |
) | $ | |||||||
| Sale of |
$ | $ | ( |
) | $ | |||||||
| Underwriting fee | $ | ( |
) | $ | $ | |||||||
| Deferred underwriting fee | $ | ( |
) | $ | $ | |||||||
| Offering costs | $ | ( |
) | $ | $ | |||||||
| Initial classification of warrant liability | $ | ( |
) | $ | $ | |||||||
| Reclassification of offering costs related to warrants | $ | $ | ( |
) | $ | |||||||
| Change in Class A common stock subject to possible redemption | $ | ( |
) | $ | $ | |||||||
| Subsequent remeasurement under ASC 480-10-S99 against additional paid-in capital | $ | $ | ( |
) | $ | ( |
) | |||||
| Subsequent remeasurement under ASC 480-10-S99 against accumulated deficit | $ | $ | ( |
) | $ | ( |
) | |||||
8
| Statement of Cash flows for the three months ended March 31, 2021 | As Previously Reported | Restatement | As Restated | |||||||||
| Initial value of shares subject to possible redemption | $ | $ | ( | ) | $ | |||||||
| Change in value of shares subject to possible redemption | $ | $ | ( | ) | $ | |||||||
| Balance Sheet as of June 30, 2021 (per Form 10-Q filed on August 20, 2021) | ||||||||||||
| Shares Subject to Redemption | $ | $ | $ | |||||||||
| Stockholders’ equity (deficit) | ||||||||||||
| Class A Common Stock | $ | $ | ( | ) | $ | |||||||
| Class B Common Stock | $ | $ | $ | |||||||||
| Additional Paid in Capital | $ | $ | ( | ) | $ | |||||||
| Retained Earnings (Accumulated Deficit) | $ | $ | ( | ) | $ | ( | ) | |||||
| Total Stockholders’ Equity (Deficit) | $ | $ | ( | ) | $ | ( | ) | |||||
| Number of shares subject to redemption | ||||||||||||
| Statement of Operations for the three months ended March 31, 2021 (per Form 10-Q filed on May 24, 2021) | ||||||||||||
| Basic and diluted weighted average shares outstanding, common stock subject to redemption | ||||||||||||
| Basic and diluted weighted average shares outstanding, common stock not subject to redemption | ( | ) | ||||||||||
| EPS - Redeemable Shares | $ | $ | $ | |||||||||
| EPS - Non-Redeemable Shares | $ | $ | ( | ) | $ | |||||||
| Statement of Operations for the three and six months ended June 30, 2021 (per Form 10-Q filed on August 20, 2021) | ||||||||||||
| Three months | ||||||||||||
| Basic and diluted weighted average shares outstanding, common stock subject to redemption | ||||||||||||
| Basic and diluted weighted average shares outstanding, common stock not subject to redemption | ( | ) | ||||||||||
| EPS - Redeemable Shares | ( | ) | ( | ) | ||||||||
| EPS - Non-Redeemable Shares | ( | ) | ( | ) | ||||||||
| Six months | ||||||||||||
| Basic and diluted weighted average shares outstanding, common stock subject to redemption | ||||||||||||
| Basic and diluted weighted average shares outstanding, common stock not subject to redemption | ( | ) | ||||||||||
| EPS - Redeemable Shares | $ | $ | $ | |||||||||
| EPS - Non-Redeemable Shares | $ | $ | ( | ) | $ | |||||||
| Statement of Changes in Stockholders’ (Deficit) Equity for the three months ended June 30, 2021 | As Previously Reported | Restatement Adjustment | As Restated | |||||||||
| Change in Class A common stock subject to possible redemption | $ | $ | ( |
) | $ | |||||||
| Statement of Cash flows for the six months ended June 30, 2021 | As Previously Reported | Restatement | As Restated | |||||||||
| Initial value of shares subject to possible redemption | $ | $ | ( | ) | $ | |||||||
| Change in value of shares subject to possible redemption | $ | $ | ( | ) | $ | |||||||
9
Note 3 - Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected through December 31, 2021.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the final prospectus filed by the Company with the SEC February 1, 2021, and the Company’s annual report filed on Form 10-K.
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (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 auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of these unaudited condensed financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2021 and December 31, 2020.
10
Cash and Securities Held in Trust Account
Investment held in Trust Account consist of United States Treasury securities. The Company classifies its United States Treasury securities as held-to-maturity in accordance with FASB ASC Topic 320 “Investments - Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost and adjusted for the amortization or accretion of premiums or discounts.
A decline in the market value of held-to-maturity securities below cost that is deemed to be other than temporary, results in an impairment that reduces the carrying costs to such securities’ fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment is other than temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and the duration of the impairment, changes in value subsequent to year-end, forecasted performance of the investee, and the general market condition in the geographic area or industry the investee operates in.
Premiums and discounts are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective-interest method. Such amortization and accretion is included in the “Trust interest income” line item in the statements of operations. Trust interest income is recognized when earned.
Fair Value Measurements
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature. Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; | |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and | |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
11
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the 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. The fair values of cash and cash equivalents, prepaid expenses, accounts payable and accrued expenses are estimated to approximate the carrying values as of September 30, 2021 due to the short maturities of such instruments.
The Company’s warrant liability for the private placement warrants is based on a valuation model utilizing management judgment and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in a material change in fair value. The fair value of the warrant liability is classified as level 3. See Note 7 for additional information on assets and liabilities measured at fair value.
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution,
which, at times, may exceed the Federal Depository Insurance Coverage of $
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock 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, common stock is classified as stockholders’ equity. The Company’s common stock feature certain redemption rights that is considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated deficit.
12
Net Income Per Common Share
The Company has two classes of common stock, which are referred to
as Class A common stock and Class B common stock. Earnings and losses are shared pro rata between the two classes of shares. The
| For the Three Months Ended September 30, 2021 | For the Nine Months Ended September 30, 2021 | |||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Basic and diluted net income per stock: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net income | $ | $ | $ | $ | ||||||||||||
| Denominator: | ||||||||||||||||
| Weighted-average shares outstanding | ||||||||||||||||
| Basic and diluted net income per share | $ | $ | $ | $ | ||||||||||||
Offering Costs associated with the Initial Public Offering
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. Offering costs are allocated to the separable financial instruments issued in the IPO based on a relative fair value basis compared to total proceeds received. Offering costs associated with warrant liabilities is expensed, and offering costs associated with the Class A common stock are charged to the stockholders’ equity.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified on the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The Company has determined the warrants are a derivative instrument.
FASB ASC 470-20, Debt with Conversion and Other Options addresses the allocation of proceeds from the issuance of convertible debt into its equity and debt components. The Company applies this guidance to allocate IPO proceeds from the Units between Class A common stock and warrants, using the residual method by allocating IPO proceeds first to fair value of the warrants and then the Class A common stock.
13
Income Taxes
The Company accounts for income taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the unaudited condensed financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s unaudited condensed financial statements and prescribes a recognition threshold and measurement process for unaudited condensed financial statement recognition and measurement of a tax position 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. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2021 and December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations, cash flows and/or search for a target company, the specific impact is not readily determinable as of the date of the condensed financial statements. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2024 for the Company and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statement.
Note 4 - Initial Public Offering
Pursuant
to the IPO on February 2, 2021, the Company sold
Following
the closing of the IPO on February 2, 2021, $
14
All
of the
The Class A common stock is subject to SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company recognizes changes in redemption value immediately as they occur. Immediately upon the closing of the IPO, the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable common stock resulted in charges against additional paid-in capital and accumulated deficit.
As of September 30, 2021, the ordinary share reflected on the balance sheet are reconciled in the following table:
| Gross proceeds from IPO | $ | |||
| Less: | ||||
| Proceeds allocated to Public Warrants | ( | ) | ||
| Issuance costs allocated to class A common stock | ( | ) | ||
| Plus: | ||||
| Accretion of carrying value to redemption value | ||||
| Interest income | ||||
| Contingently redeemable common stock | $ |
Public Warrants
Each
whole warrant entitles the holder to purchase one share of the Company’s Class A common stock at a price of $
15
The warrants will become exercisable on the later of 12 months from the closing of the IPO or 30 days after the completion of its initial Business Combination, and will expire five years after the completion of the Company’s initial Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants is then effective and a current prospectus relating thereto is current. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In no event will the Company be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of Class A common stock underlying such unit.
Redemption of Warrants When the Price per Class A Common Stock Equals or Exceeds $18.00
Once the warrants become exercisable, the Company may redeem the outstanding warrants:
|
● | in whole and not in part; |
| ● | at a price of $0.01 per warrant; | |
| ● | upon a minimum of 30 days’ prior written notice of redemption (the “30-day redemption period”); and | |
| ● | if, and only if, the reported closing price of the Class A common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders. |
Redemption of Warrants When the Price per Class A Common Stock Equals or Exceeds $10.00
Once the warrants become exercisable, the Company may redeem the outstanding warrants:
| ||
16
If
the Company calls the warrants for redemption as described above, the management will have the option to require all holders that wish
to exercise warrants to do so on a cashless basis. In determining whether to require all holders to exercise their warrants on a cashless
basis, the management will consider, among other factors, the Company’s cash position, the number of warrants that are outstanding and
the dilutive effect on its stockholders of issuing the maximum number of shares of Class A common stock issuable upon the exercise of
the warrants. In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of Class
A common stock equal to the lesser of (A) the quotient obtained by dividing (x) the product of the number of shares of Class A common
stock underlying the warrants multiplied by the excess of the “fair market value” (defined below) over the exercise price of
the warrant by (y) the fair market value and (B)
Note 5 - Private Placement
Simultaneously
with the closing of the IPO, the Sponsor purchased an aggregate of
Each
Private Placement Warrant entitles the holder to purchase one share of the Class A common stock at a price of $
The
Company’s Sponsor has agreed to (i) waive its redemption rights with respect to the founder shares and public shares in connection with
the completion of the Company’s initial Business Combination, (ii) waive its redemption rights with respect to the founder shares and
public shares in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation
(A) to modify the substance or timing of the Company’s obligation to provide for the redemption of the Company’s public shares in connection
with an initial Business Combination or to redeem
Note 6 - Related Party Transactions
Founder Shares
In
November 2020, the Company’s initial stockholders purchased an aggregate of
With
certain limited exceptions, the founder shares are not transferable, assignable or salable (except to the Company’s officers and directors
and other persons or entities affiliated with the Sponsor, each of whom will be subject to the same transfer restrictions) until the
earlier of (A) one year after the completion of the Company’s initial Business Combination or (B) subsequent to the Company’s initial
Business Combination, (x) if the reported closing price of Class A common stock equals or exceeds $
17
Due to Related Party
The
balance of $
Promissory Note - Related Party
The
Company’s Sponsor has agreed to loan the Company an aggregate of up to $
Related Party Loans
In
order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of
the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital
Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds
of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the
Trust Account. In the event that a Business Combination does not close, the Company may use a portion of the working capital held outside
the Trust Account to repay the Working Capital Loans but no proceeds from the Trust Account would be used to repay the Working Capital
Loans. Up to $
Administrative Service Fee
The
Company has agreed to pay an affiliate of its Sponsor, commencing on January 28, 2021, a total of $
Note 7 - Recurring Fair Value Measurements
Cash and Securities Held in Trust Account
As
of September 30, 2021, investment in the Company’s Trust Account consisted of $
| Carrying Value/Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value as of September 30, 2021 |
|||||||||||||
| U.S. Money Market | $ | $ | $ | $ | ||||||||||||
| U.S. Treasury Securities | ( |
) | ||||||||||||||
| $ | $ | $ | ( |
) | $ | |||||||||||
18
Warrant Liability
At
September 30, 2021, the Company’s warrants liability was valued at $
Initial Measurement
The estimated fair value of the warrant liability on February 2, 2021 is determined using Level 3 inputs. Inherent in a Monte-Carlo simulation model are assumptions related to expected stock-price volatility (pre-merger and post-merger), expected term, dividend yield and risk-free interest rate. The Company estimates the volatility of its common stock based on management’s understanding of the volatility associated with instruments of other similar entities. The risk-free interest rate is based on the U.S. Treasury Constant Maturity similar to the expected remaining life of the warrants. The expected life of the warrants is simulated based on management assumptions regarding the timing and likelihood of completing a business combination. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. The assumptions used in calculating the estimated fair values represent the Company’s best estimate. However, inherent uncertainties are involved. If factors or assumptions change, the estimated fair values could be materially different.
The key inputs into the Monte Carlo simulation model for the warrant liability were as follows at February 2, 2021:
Input | February 2, 2021 | |||
| Expected term (years) | ||||
| Expected volatility | % | |||
| Risk-free interest rate | % | |||
| Stock price | $ | |||
| Dividend yield | % | |||
| Exercise price | $ | |||
19
Subsequent Measurement
The
fair value of the Public Warrants at September 30, 2021 is classified as Level 1 due to the use of an observable market quote in an active
market. As of September 30, 2021, the aggregate value of Public Warrants was $
The estimated fair value of the Private Placement Warrants on September 30, 2021 is determined using Level 3 inputs. Inherent in a Monte-Carlo simulation model are assumptions related to expected stock-price volatility (pre-merger and post-merger), expected term, dividend yield and risk-free interest rate. The Company estimates the volatility of its common stock based on management’s understanding of the volatility associated with instruments of other similar entities. The risk-free interest rate is based on the U.S. Treasury Constant Maturity similar to the expected remaining life of the warrants. The expected life of the warrants is simulated based on management assumptions regarding the timing and likelihood of completing a business combination. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. The assumptions used in calculating the estimated fair values represent the Company’s best estimate. However, inherent uncertainties are involved. If factors or assumptions change, the estimated fair values could be materially different.
The key inputs into the Monte Carlo simulation model for the Private Placement Warrants were as follows at September 30, 2021:
| Input | September 30, 2021 |
|||
| Expected term (years) | ||||
| Expected volatility | % | |||
| Risk-free interest rate | % | |||
| Stock price | $ | |||
| Dividend yield | % | |||
| Exercise price | $ | |||
The following table sets forth a summary of the changes in the fair value of the Level 3 warrant liability for the nine months ended September 30, 2021:
| Warrant Liability | ||||
| Fair value as of December 31, 2020 | $ | |||
| Initial fair value of warrant liability upon issuance at IPO | ||||
| Transfer out of Level 3 to Level 1 | ( | ) | ||
| Change in fair value | ( | ) | ||
| Fair value as of September 30, 2021 | $ | |||
20
Recurring Fair Value Measurements
The following table presents information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of September 30, 2021, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
| September 30, | Quoted Prices In Active Markets | Significant Other Observable Inputs | Significant Other Unobservable Inputs | |||||||||||||
| 2021 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| U.S. Money Market held in Trust Account | $ | $ | $ | $ | ||||||||||||
| U.S. Treasury Securities held in Trust Account | $ | $ | ||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Liabilities: | ||||||||||||||||
| Public Warrant Liability | $ | $ | $ | $ | ||||||||||||
| Private Warrant Liability | $ | $ | $ | |||||||||||||
| $ | $ | $ | ||||||||||||||
Note 8 - Commitments and Contingencies
Registration Rights
The holders of the founder shares, Private Placement Warrants, and warrants that may be issued upon conversion of Working Capital Loans will have registration rights to require the Company to register a sale of any of its securities held by them pursuant to a registration rights agreement signed on January 28, 2021. These holders will be entitled to make up to three demands, excluding short form registration demands, that the Company registers such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include their securities in other registration statements filed by the Company.
21
Underwriting Agreement
The
underwriters have a 45-day option from February 2, 2021 to purchase up to an additional
On
February 2, 2021, the underwriters fully exercised the over-allotment option to purchase
Note 9 - Stockholders’ Equity
Preferred
Stock - The Company is authorized to issue a total of
Class
A Common Stock - The Company is authorized to issue a total of
Class
B Common Stock - The Company is authorized to issue a total of
The
Company’s Sponsor, directors and officers have agreed not to transfer, assign or sell their founder shares until the earlier to occur
of (A) one year after the completion of the Company’s initial Business Combination or (B) subsequent to the Company’s initial Business
Combination, (x) if the reported closing price of the Company’s Class A common stock equals or exceeds $
The
shares of Class B common stock will automatically convert into shares of the Company’s Class A common stock at the time of its initial
Business Combination on a one-for-one basis, subject to adjustment pursuant to certain anti-dilution rights, as described herein. In
the case that additional shares of Class A common stock or equity-linked securities are issued or deemed issued in connection with the
Company’s initial Business Combination, the number of shares of Class A common stock issuable upon conversion of all founder shares will
equal, in the aggregate, on an as-converted basis,
Holders of record of the Class A common stock and holders of record of the Class B common stock will vote together as a single class on all matters submitted to a vote of the Company’s stockholders, with each share of common stock entitling the holder to one vote except as required by law.
Note 10 - Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements were available to be issued. The Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
22
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References to the “Company,” “us,” “our” or “we” refer to Clarim Acquisition Corp. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed financial statements and related notes included herein.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report including, without limitation, statements under 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. When used in this Report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward- looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on the Company’s behalf are qualified in their entirety by this paragraph.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Overview
We are a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting an initial business combination.
We leverage the more than nine decades of combined operational and financial experience of our management team and board of directors who are both established e-commerce entrepreneurs and sophisticated investors. We believe our extensive industry experience and proven ability to source, acquire, grow and revitalize companies will provide our management team with a robust and consistent flow of acquisition opportunities. Our management team and board’s broad relationships across multiple networks, including leading consumer and technology company founders, executives of private and public companies, leading M&A investment banks and private equity firms, as well as their ability to engage early with founder-led businesses represents a differentiated advantage to successfully source transaction opportunities. Our team has been immersed in the same ecosystem as the current founders of private companies who are making decisions on how to build currency for future growth and monetization.
While we may pursue an initial business combination target in any business, industry or geographical location, we are focusing our search primarily within the consumer-facing e-commerce sector. We are capitalizing on the ability of our management team to identify, acquire and operate a business or businesses that can benefit from our management team and board’s established relationships and operating experience. Our management team has extensive experience in identifying and executing strategic investments and has done so successfully in several sectors, particularly in digital consumer-facing businesses. Over time, we believe that all companies will need to deploy an omni-commerce strategy to succeed, and we will leverage our management team and board’s unique experience to successfully develop our business target’s omni-commerce.
23
Results of Operations
Our entire activity since inception up to September 30, 2021 relates to our formation, the Initial Public Offering and, since the closing of the Initial Public Offering, a search for a Business Combination candidate. We will not be generating any operating revenues until the closing and completion of our initial Business Combination, at the earliest. We generate non-operating income in the form of interest income on marketable securities held after the Initial Public Offering. We are incurring 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 completing a Business Combination.
For the three months ended September 30, 2021, we had net income of $1,738,856, which consisted of $23,672 in interest earned on marketable securities held in the Trust Account, and $16 in bank interest income, and $3,149,167 in unrealized gain on change in fair value of warrants, offset by $1,433,999 in operating costs which included accrued professional expenses for identifying targets, pursuing discussions with potential acquisition candidates, due diligence of prospective business combination partners and initial negotiations regarding deal terms for potential transactions.
For the nine months ended September 30, 2021, we had net income of $2,932,458, which consisted of $58,584 in interest earned on marketable securities held in the Trust Account, and $43 in bank interest income, and $5,413,333 in unrealized gain on change in fair value of warrants, offset by $1,433,999 in operating costs and $530,059 of warrant issuance costs.
Liquidity and Capital Resources
As of September 30, 2021, we had approximately $0.2 million in our operating bank account, and working capital of approximately $0.18 million.
Prior to the completion of the Initial Public Offering, our liquidity needs had been satisfied through a payment from the Sponsor of $25,000 for the founder shares to cover certain offering costs, and the loan under an unsecured promissory note from the Sponsor of $112,942. We fully paid the note to the Sponsor on February 11, 2021. Subsequent to the consummation of the Initial Public Offering and Private Placement, our liquidity needs have been satisfied through the proceeds from the consummation of the Private Placement not held in the Trust Account.
In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of the Sponsor or certain of our officers and directors may, but are not obligated to, provide us Working Capital Loans. To date, there were no amounts outstanding under any Working Capital Loans.
The Company also subsequently entered into a promissory note with the Sponsor on November 19, 2021 pursuant to which the Company may draw down capital to fund its working capital needs or in connection with the initial business combination, up to a total principal amount in aggregate of up to $750,000. The Sponsor has also informally agreed to commit additional funding as and if necessary and agreed with the Company of up to $250,000 upon similar terms and conditions as the foregoing promissory note.
Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity to meet our needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, we will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Critical Accounting Policies and Estimates
The preparation of the unaudited condensed financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. We have identified the following as our critical accounting policies:
24
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock 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, common stock is classified as stockholders’ equity. The Company’s common stock feature certain redemption rights that is considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated deficit.
Net Income Per Common Share
The Company has two classes of shares, which are referred to as Class A common stock and Class B common stock. Earnings and losses are shared pro rata between the two classes of shares. The 14,750,000 potential common shares for outstanding warrants to purchase the Company’s stock were excluded from diluted earnings per share for the three and nine months ended September 30, 2021 because the warrants are contingently exercisable, and the contingencies have not yet been met.
Off-Balance Sheet Arrangements
As of September 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2021, due to the material weakness which exists in our internal control over financial reporting (i) as previously reported in our controls and procedures for prior periods and disclosed in our Quarterly Report(s) on Form 10-Q as filed with the SEC on May 24, 2021, and (ii) as a result of issues related to classification of redeemable common stock and the related restatements of our February 2, 2021, March 31, 2021, and June 30, 2021 financial statements (the “restatements”) regarding the classification of redeemable common stock (as further described below in this Item 4). In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our unaudited interim financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
Regarding the restatements to the Mach 31, 2021 and June 30, 2021 quarterly financial statements included in the Company’s Form 10-Qs, as filed with the SEC on May 24, 2021 and August 20, 2021, respectively, as well as the Company’s balance sheet included on the Company’s Form 8-K, as filed with the SEC on February 28, 2021, and restated on the Form 10-Q filed with the SEC on May 24, 2021, certain redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. The Company had previously classified a portion of the Class A common stock in permanent equity. The Company restated its financial statements to classify all Class A common stock as temporary equity and any related impact, as the threshold in its charter would not change the nature of the underlying shares as redeemable and thus would be required to be disclosed outside of permanent equity.
It is noted that the non-cash adjustments to the financial statement do not impact the amounts previously reported for our cash and cash equivalents or total assets. In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our unaudited interim financial statements were prepared in accordance with U.S. generally accepted accounting principles.
Changes in Internal Control over Financial Reporting
During the most recently completed fiscal quarter ended September 30, 2021, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
25
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 1A. RISK FACTORS.
Not required for a smaller reporting company. However, as of the date of this Quarterly Report, except as set forth below, there have been no material changes with respect to those risk factors previously disclosed in the Company’s final prospectus as filed with the SEC on February 1, 2021 and the Company’s quarterly report on Form 10-Q for the quarter March 31, 2021 as filed with the SEC on May 24, 2021.
The Company’s disclosure controls and procedures are not effective, due to material weakness which exists in our internal control over financial reporting.
The Company’s management has concluded that our disclosure controls and procedures were not effective as of September 30, 2021, due to the material weakness which exists in our internal control over financial reporting (i) as previously reported in our controls and procedures for prior periods and disclosed in our Quarterly Report(s) on Form 10-Q as filed with the SEC on May 24, 2021, and (ii) as a result of issues related to classification of redeemable common stock and the related restatements of our February 2, 2021, March 31, 2021, and June 30, 2021 financial statements (the “restatements”) regarding the classification of redeemable common stock.
The material weakness in our internal control over financial reporting may result in inaccurate financial reporting and incorrect financial statements
Due to the material weakness in our internal control over financial reporting, we cannot provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. Our material weakness in our internal control over financial reporting is a deficiency in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. These material weaknesses could result in a misstatement of substantially all accounts or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected.
The Company’s prior financial statements should not be relied upon, due to material misstatements in the Company’s prior financials
In the Company’s previously issued financial statements, a portion of the Class A common stock was classified as permanent equity to maintain net tangible assets greater than $5,000,000 on the basis that the Company will consummate its initial Business Combination only if the Company has net tangible assets of at least $5,000,001. Thus, the company has historically classified a portion of Class A common stock in permanent equity to satisfy the $5,000,000 net tangible asset requirement.
However, in light of recent comment letters issued by the SEC to several special purpose acquisition companies, management re-evaluated the Company’s application of ASC 480-10-S99-3A to its accounting classification of the Class A common stock. Upon re-evaluation, management determined that the Class A common stock include certain provisions that require classification of the Class A common stock as temporary equity regardless of the minimum net tangible asset required by the Company to complete its initial Business Combination.
In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the changes and has determined that the related impact was material to the previously presented financial statements and those previously issued financial statements should no longer be relied upon. Therefore, the Company, in consultation with its Audit Committee, concluded that its previously issued financial statements should be restated to report all Class A common stock as temporary equity. As such the Company is reporting these restatements to those periods in this Quarterly Report.
26
Regarding the restatements to the Mach 31, 2021 and June 30, 2021 quarterly financial statements included in the Company’s Form 10-Qs, as filed with the SEC on May 24, 2021 and August 20, 2021, respectively, as well as the Company’s balance sheet included on the Company’s Form 8-K, as filed with the SEC on February 28, 2021, and restated on the Form 10-Q filed with the SEC on May 24, 2021, certain redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. The Company had previously classified a portion of the Class A common stock in permanent equity. The Company restated its financial statements to classify all Class A common stock as temporary equity and any related impact, as the threshold in its charter would not change the nature of the underlying shares as redeemable and thus would be required to be disclosed outside of permanent equity.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Use of Proceeds
On February 2, 2021, we consummated our initial public offering of 28,750,000 units, including 3,750,000 units issued pursuant to the exercise of the underwriters’ over-allotment option in full. Each unit consists of one share of Class A common stock, par value $0.0001 per share, and one-third of one redeemable warrant, with each whole warrant entitling the holder thereof to purchase one share of Class A common stock for $11.50 per share.
The units were sold at a price of $10.00 per unit, generating gross proceeds to the Company of $287,500,000. On February 2, 2021, simultaneously with the consummation of our initial public offering, we completed the private sale of an aggregate of 5,166,667 warrants at a purchase price of $1.50 per private placement warrant, to Clarim Partners, LLC (“Sponsor”), generating gross proceeds of $7,750,000.
Following the closing of our initial public offering on February 2, 2021, a total of $287,500,000 comprised of $281,750,000 of the proceeds from the IPO and $5,750,000 of the proceeds of the sale of the Private Placement Warrants, was placed in a U.S.-based trust account maintained by Continental Stock Transfer & Trust Company, acting as trustee. The proceeds held in the trust account may be invested by the trustee only in U.S. government securities 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, as amended.
There has been no material change in the planned use of the proceeds from our initial public offering and the private placement as is described in the Company’s final prospectus related to our initial public offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
27
ITEM 6. EXHIBITS.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
| ** | Furnished. |
28
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 hereunto duly authorized.
| Dated: November 22, 2021 | CLARIM ACQUISITION CORP. | |
| By: | /s/ James F. McCann | |
| James F. McCann | ||
| Chief Executive Officer and Chairman of the Board | ||
| (Principal Executive Officer) | ||
| Dated: November 22, 2021 | By: | /s/ Jaymin Patel |
| Jaymin Patel | ||
| Chief Financial Officer, President and Director | ||
| (Principal Financial Officer) |
29