UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from to________________
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (IRS Employer Identification No.) |
| (Address Of Principal Executive Offices) | (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, $0.0001 par value, and one-fourth of one redeemable warrant | SLAC.U | NYSE | ||
| Redeemable warrants included as part of the units | SLAC WS | NYSE |
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. Yes ☐
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, 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 August 16, 2021,
SOCIAL LEVERAGE ACQUISITION CORP I
Form 10-Q
For the Quarter Ended June 30, 2021
Table of Contents
i
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
SOCIAL LEVERAGE ACQUISITION CORP I
CONDENSED BALANCE SHEETS
| June 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| Assets: | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Deferred offering costs | ||||||||
| Investments held in Trust Account | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity: | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Note payable - related party | ||||||||
| Franchise tax payable | ||||||||
| Total current liabilities | ||||||||
| Deferred legal fees | ||||||||
| Derivative warrant liabilities | ||||||||
| Deferred underwriting commissions | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Class A common stock, $ | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, $ | ||||||||
| Class A common stock, $ | ||||||||
| Class B common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
SOCIAL LEVERAGE ACQUISITION CORP I
CONDENSED STATEMENTS OF OPERATIONS
For The Three and Six Months Ended June 30, 2021 (Unaudited)
| For the Three Months Ended June 30, 2021 | For the Six Months Ended June 30, 2021 | |||||||
| (unaudited) | (unaudited) | |||||||
| General and administrative expenses | $ | $ | ||||||
| General and administrative expenses - related party | ||||||||
| Franchise tax expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense) | ||||||||
| Change in fair value of derivative warrant liabilities | ||||||||
| Offering costs associated with derivative warrant liabilities | - | ( | ) | |||||
| Income from investments held in Trust Account | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Weighted average shares outstanding of Class A common stock subject to possible redemption, basic and diluted | ||||||||
| Basic and diluted net income per share, Class A common stock subject to possible redemption | $ | $ | ||||||
| Weighted average shares outstanding of non-redeemable common stock, basic and diluted | ||||||||
| Basic and diluted net income (loss) per share, non-redeemable common stock | $ | $ | ( | ) | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
SOCIAL LEVERAGE ACQUISITION CORP I
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For The Three and Six Months Ended June 30, 2021 (Unaudited)
| Common Stock | Additional | Total | ||||||||||||||||||||||||||
| Class A | Class B | Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance - December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Sale of units in initial public offering, less allocation to derivative warrant liabilities | ||||||||||||||||||||||||||||
| Offering costs | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Purchase price of private placement warrants in excess of initial fair value | - | - | ||||||||||||||||||||||||||
| Class A common stock subject to possible redemption | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance - March 31, 2021 (Unaudited) | ( | ) | ||||||||||||||||||||||||||
| Class A common stock subject to possible redemption | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance - June 30, 2021 (Unaudited) | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
SOCIAL LEVERAGE ACQUISITION CORP I
CONDENSED STATEMENT OF CASH FLOWS
For The Six Months Ended June 30, 2021 (Unaudited)
| Cash Flows from Operating Activities: | ||||
| Net loss | $ | ( | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||
| Change in fair value of derivative warrant liabilities | ( | ) | ||
| Offering costs associated with derivative warrant liabilities | ||||
| Income from investments held in Trust Account | ( | ) | ||
| General and administrative expenses paid by related party under promissory note | ||||
| Changes in operating assets and liabilities: | ||||
| Prepaid expenses | ( | ) | ||
| Accounts payable | ||||
| Accrued expenses | ||||
| Franchise tax payable | ||||
| Net cash used in operating activities | ( | ) | ||
| Cash Flows from Investing Activities: | ||||
| Cash deposited in Trust Account | ( | ) | ||
| Net cash used in investing activities | ( | ) | ||
| Cash Flows from Financing Activities: | ||||
| Proceeds received from initial public offering, gross | ||||
| Proceeds received from private placement | ||||
| Repayment of note payable to related party | ( | ) | ||
| Offering costs paid | ( | ) | ||
| Net cash provided by financing activities | ||||
| Net increase in cash | ||||
| Cash - beginning of the period | ||||
| Cash - end of the period | $ | |||
| Supplemental disclosure of noncash activities: | ||||
| Offering costs included in accrued expenses | $ | |||
| Offering costs paid by related party under promissory note | $ | |||
| Outstanding accounts payable paid by related party under promissory note | $ | |||
| Deferred legal fees | $ | |||
| Deferred underwriting commissions in connection with the initial public offering | $ | |||
| Initial value of Class A common stock subject to possible redemption | $ | |||
| Change in value of Class A common shares subject to possible redemption | $ | |||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
’
SOCIAL LEVERAGE ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1—Description of Organization and Business Operations
Social Leverage Acquisition Corp I (the “Company”) is a blank check company incorporated in Delaware on December 1, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of June 30, 2021, the Company had not commenced any operations. All activity for the period from December 1, 2020 (inception) through June 30, 2021, relates to the Company’s formation and the initial public offering (the “Initial Public Offering”). 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 and other income on investments of the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The Company’s sponsor is Social Leverage
Acquisition Sponsor I LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Company’s
Initial Public Offering was declared effective on February 11, 2021. On February 17, 2021, the Company consummated its Initial Public
Offering of
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the private placement (“Private Placement”) of
Upon the closing of the Initial Public Offering
and the Private Placement, $
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants,
although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There
is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete its initial
Business Combination with one or more operating businesses or assets having an aggregate fair market value of at least
5
SOCIAL LEVERAGE ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The Company will provide the holders (the “Public
Stockholders”) of the Public Shares 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, subject to applicable law and stock exchange listing requirements. The Public
Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then held in the Trust Account (initially
anticipated to be $
The Certificate of Incorporation will provide
that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in
concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)), will be restricted from redeeming its Public Shares with respect to more than an aggregate of
If the Company is unable to complete a Business
Combination within 24 months from the closing of the Initial Public Offering, or February 17, 2023, (as such period may be extended by
the Company’s stockholders in accordance with the Certificate of Incorporation, the “Combination Period”), the Company
will (1) cease all operations except for the purpose of winding up; (2) 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 in the trust account (net of taxes payable and less up to $
The initial stockholders agreed to waive their
rights 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 initial stockholders acquire Public Shares in or after the Initial Public
Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company
fails to complete a Business Combination within the Combination Period. The underwriters agreed to waive their rights to the deferred
underwriting commission (see Note 5) 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 in
the Trust Account will be only $
6
SOCIAL LEVERAGE ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Going Concern and Management’s Plan
Prior to the completion of the initial public offering, the Company lacked the liquidity it needed to sustain operations for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements. The Company has since completed its Initial Public Offering at which time capital in excess of the funds deposited in the trust and/or used to fund offering expenses was released to the Company for general working capital purposes. Accordingly, management has since reevaluated the Company’s liquidity and financial condition and determined that sufficient capital exists to sustain operations for one year from the date these financials are issued and therefore substantial doubt has been alleviated.
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 global pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations, and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statement. The financial statement does not include any adjustments that might result from the outcome of this uncertainty.
Note 2 — Basis of Presentation and Summary of 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 period for the three and six months ended June 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 on February 16, 2021.
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. This may make comparison of the Company’s financial statements with another public company that is neither an emerging growth company nor an emerging growth company that 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 financial statements in conformity with 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Actual results could differ from those estimates.
7
SOCIAL LEVERAGE ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 $
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 had no cash equivalents as of June 30, 2021.
Investments Held in the Trust Account
The Company’s portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When the Company’s investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in income on investments held in the Trust Account in the accompanying unaudited condensed statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities which qualify as financial instruments under the FASB ASC Topic 820, “Fair Value Measurements” equals or approximate the carrying amounts represented in the balance sheet.
Fair Value Measurements
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. |
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.
Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with derivative warrant liabilities are expensed as incurred, presented as non-operating expenses in the statement of operations. Offering costs associated with the Class A common stock issued were charged to stockholders’ equity upon the completion of the Initial Public Offering.
8
SOCIAL LEVERAGE ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). 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
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock
subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.”
Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value.
Conditionally redeemable Class A common stock (including shares of Class A 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) are classified as temporary equity. At all other times, Class A common stock are classified as stockholders’ equity. The
Company’s Class A common stock feature certain redemption rights that are considered to be outside of the Company’s control
and subject to occurrence of uncertain future events. Accordingly, as of June 30, 2021,
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under FASB ASC Topic 740, “Income Taxes” (“ASC 740”). Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement 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.
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. There were no unrecognized tax benefits as of June 30, 2021. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties as of June 30, 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.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed
by dividing net loss by the weighted-average number of common stock outstanding during the period. The Company has not considered the
effect of the warrants underlying the Units sold in the Initial Public Offering (including the consummation of the Over-allotment) and
the Private Placement to purchase an aggregate of
The Company’s statement of operations includes a presentation of income (loss) per common share for Class A common stock subject to possible redemption in a manner similar to the two-class method of income (loss) per common share. Net income (loss) per common share, basic and diluted, for Class A common stock subject to possible redemption is calculated by dividing the proportionate share of income or loss on marketable securities held by the Trust Account, net of applicable franchise and income taxes, by the weighted average number of shares of Class A common stock subject to possible redemption outstanding since original issuance.
9
SOCIAL LEVERAGE ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Net income (loss) per common share, basic and diluted, for non-redeemable common stock is calculated by dividing the net income (loss), adjusted for income or loss on marketable securities attributable to common stock subject to possible redemption, by the weighted average number of non-redeemable common stock outstanding for the period.
Non-redeemable common stock includes Founder
Shares (as defined below) and non-redeemable shares of Class A common stock, which have been classified as non-redeemable as of
June 30, 2021, to maintain permanent equity of at least $
The following table reflects the calculation of basic and diluted net income (loss) per common share:
| For the Three Months Ended June 30, 2021 | For the Six Months Ended June 30, 2021 | |||||||
| Class A Common stock subject to possible redemption | ||||||||
| Numerator: Earnings allocable to Common stock subject to possible redemption | ||||||||
| Income from investments held in Trust Account | $ | $ | ||||||
| Less: Company’s portion available to be withdrawn to pay taxes | ( | ) | ( | ) | ||||
| Net income attributable | $ | $ | ||||||
| Denominator: Weighted average Class A common stock subject to possible redemption | ||||||||
| Basic and diluted weighted average shares outstanding | ||||||||
| Basic and diluted net income per share | $ | $ | - | |||||
| Non-Redeemable Common Stock | ||||||||
| Numerator: Net income (loss) minus Net Earnings | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Net income allocable to Class A common stock subject to possible redemption | - | |||||||
| Non-redeemable net loss | $ | $ | ( | ) | ||||
| Denominator: weighted average Non-redeemable common stock | ||||||||
| Basic and diluted weighted average shares outstanding, Non-redeemable common stock | ||||||||
| Basic and diluted net income (loss) per share, Non-redeemable common stock | $ | $ | ( | ) | ||||
10
SOCIAL LEVERAGE ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.
The Company’s management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying unaudited condensed financial statements.
Note 3 — Initial Public Offering
On February 17, 2021, the Company consummated
its Initial Public Offering of
Each Unit consists of one share of Class A common
stock, and one-fourth of one redeemable warrant (each, a “Public Warrant”). Each whole Public Warrant entitles the holder
to purchase one share of Class A common stock at a price of $
Note 4 — Related Party Transactions
Founder Shares
On December 11, 2020, the Sponsor paid $
The initial stockholders agreed, subject to limited
exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (1) one year after the completion
of the initial Business Combination; and (2) subsequent to the initial Business Combination (x) if the last reported sale price of the
Class A common stock equals or exceeds $
Private Placement Warrants
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the Private Placement of
Each whole Private Placement Warrant is exercisable
for one whole share of Class A common stock at a price of $
The Sponsor and the Company’s officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination.
11
SOCIAL LEVERAGE ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Related Party Loans
On December 11, 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 lenders’ discretion, up
to $
Administrative Support Agreement and Certain Other Payments
Commencing on the date that the Company’s
securities were first listed on the New York Stock Exchange through the earlier of consummation of the initial Business Combination and
the Company’s liquidation, the Company agreed to pay the Sponsor a total of $
The Sponsor, executive officers and directors, or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the Company’s behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations. The Company’s audit committee will review on a quarterly basis all payments that were made to the Sponsor, executive officers or directors, or the Company’s or their affiliates.
Note 5 — Commitments and 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), were entitled to registration rights pursuant to a registration rights agreement. These holders were 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 Company granted the underwriters a 45-day
option from the date of the final prospectus relating to the Proposed Public Offering to purchase up to
The underwriters were entitled to an underwriting
discount of $
Deferred Legal Fees
The Company engaged a legal counsel firm for
legal advisory services, and the legal counsel agreed to defer their fees in excess of $
12
SOCIAL LEVERAGE ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statement. The unaudited condensed financial statement does not include any adjustments that might result from the outcome of this uncertainty.
Note 6 — 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
Holders of Class A common stock and holders of Class B common stock will vote together as a single class, with each share entitling the holder to one vote; provided, however that, prior to the closing of the Company’s initial Business Combination, only holders of Class B common stock will have the right to elect or remove the Company’s directors.
The Class B common stock will automatically convert
into Class A common stock at the time of the initial Business Combination, or earlier at the option of the holder, 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 provided 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 Initial Public Offering and related to the closing of the initial Business Combination, the ratio
at which the shares of Class B common stock will convert into shares of Class A common stock will be adjusted (unless the holders of
a majority of the issued and outstanding shares of Class B common stock agree to waive such anti-dilution 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,
Note 7—Warrants
As of June 30, 2021 and December 31, 2020, the
Company had
13
SOCIAL LEVERAGE ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Public Warrants may only be exercised in whole
and only 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 on the later of (a) 30 days after the completion of a Business Combination
and (b) 12 months from the closing of the Initial Public Offering; provided in each case 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 (or the Company permits holders to exercise their Public Warrants on a cashless
basis and such cashless exercise is exempt from registration under the Securities Act). The Company 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 commercially
reasonable efforts to file with the SEC and have an effective registration statement covering 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. If a registration statement covering the Class A common stock issuable upon exercise of the warrants is not effective
by the 60th business day after the closing of the initial Business Combination, warrant holders may, until such time as there
is an effective registration statement and during any period when the Company will have failed to maintain an effective registration
statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption.
Notwithstanding the above, if the Company’s shares of Class A common stock are at the time of any exercise of a warrant not listed
on a national securities exchange such that they satisfy 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 elect, it will not be required
to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will use commercially reasonable
efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. The Public Warrants
will expire
The warrants have an exercise price of $
The Private Placement Warrants will be identical to the Public Warrants, except that 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. Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the Sponsor or its permitted transferees, except in certain limited circumstances. If the Private Placement Warrants are held by someone other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00:
Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described herein with respect to the Private Placement Warrants):
| ● | in whole and not in part; |
| ● | at a price of $0.01 per warrant; |
| ● | upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and |
The Company will not redeem the warrants as described above unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of common stock is available throughout the 30-day redemption period.
Except as described below, none of the Private Placement Warrants will be redeemable by us so long as they are held by the Sponsor or its permitted transferees.
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SOCIAL LEVERAGE ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00:
Once the warrants become exercisable, the Company may redeem the outstanding warrants:
| ● | in whole and not in part; |
| ● | at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption, provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to an agreed table based on the redemption date and the “fair market value” of Class A common stock; and |
| ● | if, and only if, the Reference Value equals or exceeds $10.00 per share as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like); and |
The “fair market value” of Class
A common stock shall mean the volume-weighted average price of Class A common stock for the 10 trading days immediately following the
date on which the notice of redemption is sent to the holders of warrants. In no event will the warrants be exercisable in connection
with this redemption feature for more than
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 8 — Fair Value Measurements
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
| Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
| Assets: | ||||||||||||
| Investments held in Trust Account - money market funds | $ | $ | $ | |||||||||
| Liabilities: | ||||||||||||
| Derivative warrant liabilities - Public warrants | $ | $ | $ | |||||||||
| Derivative warrant liabilities - Private placement warrants | $ | $ | $ | |||||||||
As of December 31, 2020, there were no assets or liabilities that were measured at fair value on a recurring basis.
Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. The estimated fair value of the Public Warrants was transferred from a Level 3 measurement to a Level 1 measurement, when the Public Warrants were separately listed and traded in an active market in April 2021. The estimated fair value of the Private Placement Warrants was transferred from a Level 3 measurement to a Level 2 measurement in April 2021, as the transfer of Private Placement Warrants to anyone who is not a permitted transferee would result in the Private Placement Warrants having substantially the same terms as the Public Warrants, the Company determined that the fair value of each Private Placement Warrant is equivalent to that of each Public Warrant.
15
SOCIAL LEVERAGE ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
For periods where no observable traded price
is available, the Company utilized a Monte-Carlo simulation to estimate the fair value of the Public Warrants and used the Black-Scholes
option pricing model to estimate the fair value of the Private Placement Warrants. For periods subsequent to the detachment of the Public
Warrants from the Units, the fair value of the Public Warrants is based on the observable listed price for such warrants. The estimated
fair value of the Public and Private Placement Warrants, prior to the Public Warrants being traded in an active market, was determined
using Level 3 inputs. Inherent in a binomial lattice model are assumptions related to the Unit price, expected volatility, risk-free
interest rate, term to expiration, and dividend yield. The Unit price is based on the publicly traded price of the Units as of the measurement
date. The Company estimated the volatility for the Public and Private Placement Warrants based on the implied volatility from the traded
prices of warrants issued by other special purpose acquisition companies. The risk-free interest rate is based on interpolated U.S. Treasury
rates, commensurate with a similar term to the Public and Private Placement Warrants. The term to expiration was calculated as the contractual
term of the Public and Private Placement Warrants, assuming one year to a Business Combination from the IPO date. Finally, the Company
does not anticipate paying a dividend. Any changes in these assumptions can change the valuation significantly. For the three and six
months ended June 30, 2021, the Company recognized a gain resulting from changes in the fair value of derivative warrant liabilities
of approximately $
The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:
| Initial Fair Value | June 30, 2021 | June 30, 2021 | ||||||||||
| Exercise price | $ | $ | $ | |||||||||
| Stock price | $ | $ | $ | |||||||||
| Volatility | % | % | % | |||||||||
| Term (in years) | ||||||||||||
| Risk-free rate | % | % | % | |||||||||
The change in the fair value of the derivative warrant liabilities, measured using Level 3 inputs, for The three and six months ended June 30, 2021 is summarized as follows:
| Derivative warrant liabilities at January 1, 2021 | $ | |||
| Issuance of Public and Private Warrants | ||||
| Change in fair value of derivative warrant liabilities | ||||
| Derivative warrant liabilities at March 31, 2021 | $ | |||
| Transfer of Public Warrants to Level 1 | ( | ) | ||
| Transfer of Private Warrants to Level 2 | ( | ) | ||
| Derivative warrant liabilities at June 30, 2021 | $ |
Note 10 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred up to the date unaudited condensed financial statements were available to be issued. Based upon this review, the Company determined that, there have been no events that have occurred that would require adjustments to the disclosures in the unaudited condensed financial statements.
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| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
References to the “Company,” “Social Leverage Acquisition Corp I,” “Social Leverage,” “our,” “us” or “we” refer to Social Leverage Acquisition Corp I. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited interim 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.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.
Overview
We are a blank check company incorporated in Delaware on December 1, 2020. We were 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”). We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies.
Our sponsor is Social Leverage Acquisition Sponsor I LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for our Initial Public Offering was declared effective on February 11, 2021. On February 17, 2021, we consummated its Initial Public Offering of 34,500,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”), including the exercise of the underwriters’ option to purchase 4,500,000 additional Units (the “Option Units”), at $10.00 per Unit, generating gross proceeds of $345.0 million, and incurring offering costs of approximately $19.7 million, of which approximately $12.1 million and approximately $152,000 was for deferred underwriting commissions and deferred legal fees, respectively.
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 6,000,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant to the Sponsor, generating proceeds of $9.0 million.
Upon the closing of the Initial Public Offering and the Private Placement, $345.0 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was placed in a trust account (“Trust Account”) located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and invested only in U.S. government securities with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended (the “Investment Company Act”), which invest only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.
Our management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that we will be able to complete a Business Combination successfully. We must complete its initial Business Combination with one or more operating businesses or assets having an aggregate fair market value of at least 80% of the net assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the income earned on the Trust Account) at the time of the agreement to enter into the initial Business Combination. However, we will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act.
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If we are unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or February 17, 2023, (as such period may be extended by our stockholders in accordance with the Certificate of Incorporation, the “Combination Period”), we will (1) cease all operations except for the purpose of winding up; (2) 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 in the trust account (net of taxes payable and less up to $100,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any); and (3) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and our board of directors, liquidate and dissolve, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
Liquidity and Capital Resources
As of June 30, 2021, we had approximately $0.6 million in its operating bank account and working capital of approximately $1.0 million (not taking into account approximately $98,000 of taxes that may be paid using interest income from the Trust Account).
Prior to the completion of the initial public offering, we lacked the liquidity it needed to sustain operations for a reasonable period of time, which is considered to be one year from the issuance date of the financial statement. We have since completed our Initial Public Offering at which time capital in excess of the funds deposited in the trust and/or used to fund offering expenses was released to us for general working capital purposes. Accordingly, management has since reevaluated our liquidity and financial condition and determined that sufficient capital exists to sustain operations for one year from the date these financials are issued and therefore substantial doubt has been alleviated.
Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity from our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors to meet its 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.
Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on our financial position, results of our operations and/or search for a target company, the specific impact is not readily determinable as of the date of the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Results of Operations
Our entire activity since inception up to June 30, 2021 was in preparation for our formation and the Initial Public Offering. We will not be generating any operating revenues until the closing and completion of our initial Business Combination.
For the three months ended June 30, 2021, we had net income of approximately $1,952,000, which consisted of an operating loss of approximately $254,000, offset by a non-operating gain of approximately $2,194,000 resulting from the change in fair value of derivative warrant liabilities, and approximately $12,000 of income from investments held in Trust Account. The loss from operations comprised of approximately $180,000 general and administrative expenses, approximately $25,000 in general and administrative expenses – related party and approximately $49,000 in franchise tax expenses.
For the six months ended June 30, 2021, we had a net loss of approximately $580,000, which consisted of an operating loss of approximately $480,000, a non-operating loss of approximately $561,000 for offering costs associated with derivative warrant liabilities, offset by a non-operating gain of approximately $439,000 resulting from the change in fair value of derivative warrant liabilities, and approximately $22,000 of income from investments held in Trust Account. The loss from operations comprised of approximately $340,000 general and administrative expenses, approximately $43,000 in general and administrative expenses – related party and approximately $98,000 in franchise tax expenses.
Contractual Obligations
Administrative Support Agreement and Certain Other Payments
Commencing on the date that our securities were first listed on the New York Stock Exchange through the earlier of consummation of the initial Business Combination and our liquidation, we agreed to pay the Sponsor a total of $10,000 per month for office space, support and administrative services.
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The Sponsor, executive officers and directors, or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations. Our audit committee will review on a quarterly basis all payments that were made to the Sponsor, our executive officers or directors, or their affiliates.
We incurred approximately $25,000 and $43,000 in general and administrative expenses, related to these services, in the accompanying unaudited condensed statement of operations for the three and six months ended June 30, 2021, respectively. As of June 30, 2021 and December 31, 2020, the Company had accrued approximately $10,000 and $0, respectively, for services in connection with such agreement on the accompanying condensed balance sheets.
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), were entitled to registration rights pursuant to a registration rights agreement. These holders were entitled to certain demand and “piggyback” registration rights. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriters a 45-day option from the date of the final prospectus relating to the Proposed Public Offering to purchase up to 4,500,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price, less underwriting discounts and commissions. On February 17, 2021, the underwriter fully exercised its option to purchase additional Units.
The underwriters were entitled to an underwriting discount of $0.20 per Unit, or $6.9 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per Unit, or approximately $12.1 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815, “Derivatives and Hedging” (“ASC 815”). 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 8,625,000 warrants issued in connection with the Initial Public Offering (the “Public Warrants”) and the 6,000,000 Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised. The fair value of the Public Warrants and Private Placement Warrants has been estimated using a Monte Carlo simulation. The determination of the fair value of the warrant liability may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
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Class A common shares subject to possible redemption
We account 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) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A common stock (including shares of Class A 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 our control) are classified as temporary equity. At all other times, Class A common stock are classified as stockholders’ equity. Our Class A common stock feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, as of June 30, 2021, 31,293,210 shares of Class A common stock subject to possible redemption at the redemption amount were presented at redemption value as temporary equity, outside of the stockholders’ equity section of our condensed balance sheet.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed by dividing net loss by the weighted-average number of common stock outstanding during the period. We have not considered the effect of the warrants underlying the Units sold in the Initial Public Offering (including the consummation of the Over-allotment) and the Private Placement to purchase an aggregate of 14,625,000 Class A common stock in the calculation of diluted income (loss) per common share, since the exercise of the warrants would be anti-dilutive under the treasury stock method.
Our statement of operations includes a presentation of income (loss) per common share for Class A common stock subject to possible redemption in a manner similar to the two-class method of income (loss) per common share. Net income (loss) per common share, basic and diluted, for Class A common stock subject to possible redemption is calculated by dividing the proportionate share of income or loss on marketable securities held by the Trust Account, net of applicable franchise and income taxes, by the weighted average number of shares of Class A common stock subject to possible redemption outstanding since original issuance.
Net income (loss) per common share, basic and diluted, for non-redeemable common stock is calculated by dividing the net income (loss), adjusted for income or loss on marketable securities attributable to common stock subject to possible redemption, by the weighted average number of non-redeemable common stock outstanding for the period.
Non-redeemable common stock includes Founder Shares and non-redeemable shares of Class A common stock as these shares do not have any redemption features. Non-redeemable common stock participates in the income or loss on marketable securities based on non-redeemable shares’ proportionate interest.
Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. We adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact our financial position, results of operations or cash flows.
Our management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material impact on our unaudited condensed financial statements.
Off-Balance Sheet Arrangements
As of June 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
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Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
| 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. As of June 30, 2021, we were not subject to any market or interest rate risk. The net proceeds of the Initial Public Offering, including amounts in the Trust Account, will be invested in U.S. government securities with a maturity of 185 days or less or in money market funds that meet certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended, that invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
We have not engaged in any hedging activities since our inception, and we do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.
| Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended June 30, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation and in light of the Securities and Exchange Commission (“SEC”) Staff Statement, “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (SPACs)”, our Certifying Officers concluded that, solely due to the Company’s misapplication of the accounting for the Company’s warrants as liabilities described in in our Quarterly Report on Form 10Q for the fiscal quarter ended March 31, 2021, as filed with the SEC on July 8, 2021, our disclosure controls and procedures were not effective as of June 30, 2021. 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 unaudited condensed financial statements included in this Quarterly Report on Form 10Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
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 officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
Other than as described herein, there was no change in our internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2021, covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Except, the Company’s management identified a material weakness in its internal control over financial reporting due solely to the material weakness in our internal control over financial reporting regarding the classification of the Company’s Warrants as components of equity instead of as derivative liabilities. Management has implemented remediation steps to address the material weakness and to improve our internal control over financial reporting. Specifically, we expanded and improved our review process for complex securities and related accounting standards. As of June 30, 2021, this has not been fully remediated.
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PART II - OTHER INFORMATION
| Item 1. | Legal Proceedings |
None.
| Item 1A. | Risk Factors |
As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our final prospectus filed with the SEC on February 16, 2021, except for the below risk factors. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results and thus may have an adverse effect on the market price of our securities.
On April 12, 2021, the staff of the SEC (the “SEC Staff”) issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies” (“SPACs”) (the “SEC Staff Statement”). In the SEC Staff Statement, the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to equity. As a result of the SEC Staff Statement, we reevaluated the accounting treatment of our 8,625,000 Public Warrants and 6,000,000 Private Placement Warrants, and determined to classify the warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings.
As a result, included on our condensed balance sheet as of June 30, 2021 contained elsewhere in this Quarterly Report are derivative liabilities related to embedded features contained within our warrants. ASC 815, Derivatives and Hedging, provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations. As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly, based on factors, which are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our warrants each reporting period and that the amount of such gains or losses could be material. The impact of changes in fair value on earnings may have an adverse effect on the market price of our securities.
We have identified a material weakness in our internal control over financial reporting as of June 30, 2021. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may result a material adverse effect on our ability to consummate an initial business combination.
Following the issuance of the SEC Staff Statement management identified a material weakness in our internal control over financial reporting related to the accounting for the warrants issued in connection with our Initial Public Offering. Our internal control over financial reporting did not result in the proper accounting classification of the warrants, which, due to its impact on our financial statements, we determined to be a material weakness.
A material weakness is a deficiency, or a combination of deficiencies, 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. Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. Any failure to maintain internal control over our financial reporting could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis, which could delay or disrupt our efforts to consummate an initial business combination. If our financial statements are not filed on a timely basis, we may also be subject to sanctions or investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities. In either case, there could result a material adverse effect on our ability to consummate an initial business combination. We have expanded and improved our review process for complex securities and related accounting standards and continue to evaluate other steps to remediate the material weakness.
In addition, as a result of such material weakness, the change in accounting for our warrants, and other matters raised or that may in the future be raised by the SEC, we face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the material weakness in our internal control over financial reporting and the preparation of our financial statements. As of the date of this report, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have a material adverse effect on our business, results of operations and financial condition or our ability to complete a Business Combination.
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| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of 6,000,000 Private Placement Warrants at a price of $1.50 per Private Placement Warrant to the Sponsor, generating proceeds of $9.0 million.
In connection with the Initial Public Offering, our sponsor had agreed to loan us an aggregate of up to $300,000 pursuant to the Note. This loan is non-interest bearing and payable on the consummation of the Initial Public Offering. As of June 30, 2021, the loan balance was $0.
Of the gross proceeds received from the Initial Public Offering and the full exercise of the option to purchase additional shares, $345,000,000 was placed in the Trust Account. The net proceeds of the Initial Public Offering and certain proceeds from the Private Placement are invested in U.S. government treasury bills with a maturity of 180 days or less and in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations.
We paid a total of approximately $6.9 million in underwriting discounts and commissions related to the Initial Public Offering. In addition, the underwriters agreed to defer $12.1 million in underwriting discounts and commissions.
| Item 3. | Defaults upon Senior Securities |
None.
| Item 4. | Mine Safety Disclosures. |
Not applicable.
| Item 5. | Other Information. |
None.
| Item 6. | Exhibits. |
| * | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
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SIGNATURE
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: August 16, 2021 | SOCIAL LEVERAGE ACQUISITION CORP I | |
| By: | /s/ Howard Lindzon | |
| Name: | Howard Lindzon | |
| Title: | Chief Executive Officer | |
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