UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
(Mark One)
For the fiscal year ended
OR
For the transition period from to
Commission file number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including
area code:
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-half of one Redeemable Warrant | TMAC.U | The New York Stock Exchange | ||
Redeemable Warrants, each whole warrant exercisable for one share of Class A Common Stock at an exercise price of $11.50 | TMAC WS | The New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐
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 has
fi led a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting
under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report.
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The aggregate market value
of the voting stock held by non-affiliates of the Registrant on June 30, 2021, based upon the closing price of $9.67 of the Registrant’s
common stock as reported on the New York Stock Exchange, was approximately $
As of December 31, 2021,
TABLE OF CONTENTS
PART II | ||
Item 8. | Financial Statements and Supplementary Data | 1 |
PART IV | ||
Item 15. | Exhibits, Financial Statement Schedules | 2 |
Item 16. | Form 10-K Summary | 2 |
i
EXPLANATORY NOTE
This Amendment does not reflect adjustments for events occurring after March 24, 2022, the date of the filing of the Original Filing, except to the extent they are otherwise required to be included and discussed herein and did not substantively modify or update the disclosures herein other than as required to reflect the adjustments described above. Among other things, forward-looking statements made in the Original Filing have not been revised to reflect events, results or developments that occurred or facts that became known to us after the date of the Original Filing, and such forward-looking statements should be read in conjunction with our filings with the SEC, including those subsequent to the filing of the Original Filing.
The Company is also filing currently dated certifications from our Principal Executive Officer and Principal Financial Officer as Exhibits 31.1, 31.2, 32.1 and 32.2 to this Amendment No. 1.
ii
PART II
Item 8. | Financial Statements and Supplementary Data |
The financial statements required by this item are set forth following Item 16 of this Report and are incorporated herein by reference.
1
PART IV
Item 15. | Exhibits, Financial Statement Schedules |
a. | Documents filed as part of this Report |
1. | Financial Statements |
The financial statements and notes thereto which are attached hereto have been included by reference into Item 8 of this part of the annual report on Form 10-K. See the Index to Financial Statements.
2. | Financial Statement Schedules |
All schedules are omitted because they are inapplicable or not required or the required information is shown in the financial statements or notes thereto.
3. | Exhibits |
Exhibit No. | Description | |
31.1* | Certification of Principal Executive Officer Pursuant to Section 302 of Sarbanes- Oxley Act of 2002 | |
31.2* | Certification of Principal Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 | |
32.1* | Certification of Principal Executive Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2* | Certification of Principal Financial Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS* | Inline XBRL Instance Document | |
101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Inline XBRL for the cover page of this Annual Report on Form 10-K, included in the Exhibit 101 Inline XBRL Document Set. |
* | Filed herewith. |
Item 16. | Form 10-K Summary |
None.
2
THE MUSIC ACQUISITION CORPORATION
FOR THE PERIOD ENDED DECEMBER 31, 2021
Table of Contents
ITEM 8. FINANCIAL INFORMATION
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of
The Music Acquisition Corporation
Opinion on the Financial Statements
We have audited the accompanying balance sheets of The Music Acquisition Corporation (the “Company”) as of December 31, 2021 and 2020, the related statements of operations, changes in stockholders’ equity (deficit) and cash flows for the year ended December 31, 2021 and the period from October 14, 2020 (inception) through December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the year ended December 31, 2021 and the period from October 14, 2020 (inception) through December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, if the Company is unable to raise additional funds to alleviate liquidity needs and complete a business combination by February 5, 2022 then the Company will cease all operations except for the purpose of liquidating. The liquidity condition and date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
We have served as the Company’s auditor since 2020.
March 24, 2022
PCAOB ID Number
F-2
THE MUSIC ACQUISITION CORPORATION
BALANCE SHEETS
December 31, 2021 | December 31, 2020 | |||||||
Assets: | ||||||||
Current assets: | ||||||||
Cash | $ | $ | ||||||
Prepaid expenses | ||||||||
Total current assets | ||||||||
Deferred offering costs | ||||||||
Other non-current assets | ||||||||
Investments held in trust account | ||||||||
Total Assets | $ | $ | ||||||
Liabilities, Redeemable Common Stock and Stockholders’ Equity (Deficit) | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | $ | ||||||
Promissory note - related party | ||||||||
Total current liabilities | ||||||||
Deferred underwriting fee | ||||||||
Warrant liability | ||||||||
Total liabilities | ||||||||
Commitments and Contingencies | ||||||||
Class A common stock subject to possible redemption, | ||||||||
Stockholders’ Equity (Deficit): | ||||||||
Preferred stock, $ | ||||||||
Class A common stock, $ | ||||||||
Class B common stock, $ | ||||||||
Additional paid-in capital | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Total stockholders’ equity (deficit) | ( | ) | ||||||
Total Liabilities and Stockholders’ Equity (Deficit) | $ | $ |
The accompanying notes are an integral part of these financial statements.
F-3
THE MUSIC ACQUISITION CORPORATION
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2021 | For the period from October 14, 2020 (inception) to December 31, 2020 | |||||||
Formation and operating costs | $ | $ | ||||||
Loss from Operations | ( | ) | ( | ) | ||||
Other income (expense): | ||||||||
Interest earned on cash and marketable securities held in Trust Account | ||||||||
Offering costs allocated to warrants | ( | ) | ||||||
Change in fair value of warrant liability | ||||||||
Total other income | ||||||||
Net income (loss) | $ | $ | ( | ) | ||||
$ | $ | |||||||
Basic weighted average shares outstanding, Class B common stock | ||||||||
Basic net income (loss) per share, Class B common stock | $ | $ | ( | ) | ||||
Diluted weighted average shares outstanding, Class B common stock | ||||||||
Diluted net income (loss) per share, Class B common stock | $ | $ | ( | ) |
The accompanying notes are an integral part of these financial statements.
F-4
THE MUSIC ACQUISITION CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
Common Stock | Additional | Total Stockholders’ | ||||||||||||||||||||||||||
Class A | Class B | Paid-In | Accumulated | Equity | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
Balance as of October 14, 2020 (inception) | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Class B common stock issued to Sponsor | - | |||||||||||||||||||||||||||
Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
Balance as of December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
Accretion of Class A common stock subject to possible redemption | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
Excess cash proceeds from Private Placement over fair value of Private Warrants liability | - | - | ||||||||||||||||||||||||||
Net income | - | - | ||||||||||||||||||||||||||
Balance as of December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) |
The accompanying notes are an integral part of these financial statements.
F-5
THE MUSIC ACQUISITION CORPORATION
STATEMENTS OF CASH FLOWS
For the year ended | For
the period from (Inception) through | |||||||
December 31, 2021 | December 31, 2020 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income (loss) | $ | $ | ( | ) | ||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Interest earned on marketable securities held in Trust Account | ( | ) | ||||||
Change in fair value of warrant liabilities | ( | ) | ||||||
Offering costs allocated to warrants | ||||||||
Changes in current assets and current liabilities: | ||||||||
Prepaid assets | ( | ) | ||||||
Other noncurrent assets | ( | ) | ||||||
Accounts payable and accrued expenses | ||||||||
Net cash used in operating activities | ( | ) | ||||||
Cash Flows from Investing Activities: | ||||||||
Investment of cash into trust account | ( | ) | ||||||
Net cash used in investing activities | ( | ) | ||||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from issuance of Founder Shares | ||||||||
Proceeds from sale of Units, net of underwriting discount | ||||||||
Proceeds from issuance of Private Placement Warrants | ||||||||
Proceeds from promissory note - related party | ||||||||
Repayment of promissory note - related party | ( | ) | ||||||
Payment of deferred offering costs | ( | ) | ( | ) | ||||
Net cash provided by financing activities | ||||||||
Net Change in Cash | ||||||||
Cash, beginning of period | ||||||||
Cash, end of period | $ | $ | ||||||
Supplemental disclosure of non-cash financing activities: | ||||||||
Accrued deferred offering costs | $ | $ | ||||||
Deferred underwriters’ discount payable charged to additional paid-in capital | $ | $ |
The accompanying notes are an integral part of these financial statements.
F-6
THE MUSIC ACQUISITION CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1 - Organization and Business Operations
The Music Acquisition Corporation (the “Company”) is a newly organized blank check company incorporated as a Delaware corporation on October 14, 2020. The Company was formed for the purpose of effecting a merger, stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (“Business Combination”).
As of December 31, 2021, the Company had not commenced any operations. All activity for the year ended December 31, 2021, relates to the Company’s formation and the Initial Public Offering (“IPO”) as described below, and identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the IPO.
The registration statement
for the Company’s IPO was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on February
2, 2021 (the “Effective Date”). On February 5, 2021, the Company consummated the IPO of
Simultaneously with the closing
of the IPO, the Company consummated the sale of
Transaction costs of the IPO
amounted to $
Following the closing of the
IPO on February 5, 2021, $
The Company’s Business
Combination must be with one or more operating businesses or assets with a fair market value equal to at least
The Company will provide its public holders of its outstanding public shares (the “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. Except for as required by applicable law or stock exchange listing requirements, the decision as to whether the Company will seek stockholder approval of a proposed Business Combination or conduct a tender offer will be made by the Company, solely in its discretion.
F-7
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 calculated as of two business
days prior to the consummation of the initial Business Combination, including interest earned on the funds held in the Trust Account (net
of amounts which may be withdrawn to pay taxes), divided by the number of then outstanding public shares, subject to the limitations described
in the prospectus. The amount in the Trust Account is initially anticipated to be $
The Company will have only
24 months from the closing of the IPO to complete an initial Business Combination (the “Combination Period”). However, if
the Company does not complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for
the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares,
at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on
the funds held in the Trust Account and not previously released to the Company to pay its taxes (less up to $
The Company’s initial stockholders, officers and directors have agreed to (i) waive their redemption rights with respect to any Founder Shares (as defined below) and public shares they hold in connection with the completion of the initial Business Combination, (ii) waive their redemption rights with respect to any Founder Shares and public shares they hold in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation, (iii) waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares they hold if the Company fails to complete the initial Business Combination within the Combination Period, and (iv) vote any Founder Shares and any public shares held by them in favor of the Company’s initial Business Combination.
F-8
Liquidity and Capital Resources
As of December 31, 2021, the
Company had approximately $
The Company’s liquidity
needs up to February 5, 2021, had been satisfied through a capital contribution from the Sponsor of $
On February 25, 2022, (i) Neil
Jacobson, the Company’s Chief Executive Officer and a manager of Music Acquisition Sponsor, LLC, the Sponsor, and (ii) Todd Lowen,
the Company’s Chief Financial Officer and Chief Operating Officer and a manager of the Sponsor, (each, a “Lender” and
collectively, the “Lenders”), each loaned $
As of December 31, 2021, the
Company had approximately $
To date, the Company’s
liquidity needs have been satisfied through a payment of $
If the Company does not consummate an initial business combination by February 5, 2023, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and mandatory liquidation, should an initial business combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after February 5, 2023.
Risks and Uncertainties
Management is continuing to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that it 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 statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 2 - Significant Accounting Policies
Basis of Presentation
The accompanying financial statements of the Company are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC. In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made that are necessary to present fairly the financial position, and the results of its operations and its cash flows.
F-9
Emerging Growth Company Status
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 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 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. One of the more significant accounting estimates included in these financial statements is the determination of the fair value of the warrant liability. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of December 31, 2021, and 2020.
Marketable Securities Held in Trust Account
At December 31, 2021, the assets held in the Trust Account were held in money market funds which invest in U.S. Treasury securities and are presented at fair value based upon the quoted market price (see Note 8). During the year ended December 31, 2021, the Company did not withdraw any of the interest income from the Trust Account to pay its tax obligations.
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 Company coverage limit of $
F-10
Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates 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 FASB ASC Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”).
The Public Warrants and Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the carrying value of the instruments to fair value at each reporting period until they are exercised. The initial fair value of the Public Warrants issued in connection with the IPO and the fair value of the Private Placement Warrants were estimated using the Monte Carlo simulation model. The fair value of the Public Warrants as of December 31, 2021, is based on observable listed prices for such warrants. The fair value of the Private Placement Warrants as of December 31, 2021, was estimated using the Black-Scholes simulation model. 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.
Offering Costs Associated with the Initial Public Offering
The Company complies with the requirements of ASC 340-10-S99-1. Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the IPO that were directly related to the IPO. 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 are expensed as incurred and presented as non-operating expenses in the statements of operations. Offering costs associated with the Class A common stock were charged to temporary equity upon the completion of the IPO.
Class A Common Stock Subject to Possible Redemption
All the shares of Class A common stock sold as part of the Units in the IPO contain a redemption feature which allows for the redemption of such public shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the initial Business Combination and in connection with certain amendments to the Company’s amended and restated certificate of incorporation. In accordance with the SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all the entity’s equity instruments, are excluded from the provisions of ASC 480. Accordingly, at December 31, 2021, all shares of Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheets.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the Class A common stock subject to possible redemption to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security. Effective with the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
The Class A common stock subject to possible redemption reflected on the balance sheet as of December 31, 2021, is reconciled in the following table:
Gross Proceeds | $ | |||
Less: | ||||
Proceeds allocated to Public Warrants | ( | ) | ||
Class A common stock issuance costs | ( | ) | ||
Plus: | ||||
Accretion of carrying value to redemption value | ||||
Class A common stock subject to possible redemption | $ |
F-11
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 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. The deferred tax assets were deemed to be de minimis as of December 31, 2021, and 2020.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for 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 periods, 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 December 31, 2021, and 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company has identified the United States as its only “major” tax jurisdiction. The Company is subject to income tax examinations by major taxing authorities since inception. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. The provision for income taxes was deemed to be de minimis for the year ended December 31, 2021, and 2020.
Net Income (Loss) Per Common Stock
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding during the period, excluding stocks subject to forfeiture. The calculation of diluted income (loss) per common share does not consider the effect of the warrants issued since the exercise of the warrants are contingent upon the occurrence of future events. However, the diluted earnings (loss) per share calculation includes the shares subject to forfeiture from the first day of the interim period in which the contingency on such shares was resolved (at least for this one because it resolved this year).
Basic and diluted net income (loss) per share for Class A common stock and Class B common stock is calculated by dividing net income (loss) attributable to the Company by the weighted average number of shares of Class A common stock and shares of Class B common stock outstanding, allocated proportionally to each class of common stock. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
F-12
Reconciliation of Net Income (Loss) per Common Share
Basic and diluted income (loss) per share for Class A common stock and for Class B common stock is calculated as follows:
For the year ended December 31, 2021 | For the period from October 14, 2020 (inception) to December 31, 2020 | |||||||
Net Income per share for Class A common stock: | ||||||||
Allocation of net income (loss) to Class A common stock | $ | $ | ||||||
Weighted Average Shares, Class A common stock | ||||||||
Basic and diluted net income (loss) per share | $ | $ | ||||||
Net Income per share for Class B common stock: | ||||||||
Allocation of net income (loss) to Class B common stock | $ | $ | ( | ) | ||||
Basic weighted Average Shares, Class B common stock | ||||||||
Basic net income (loss) per share | $ | $ | ( | ) | ||||
Diluted weighted Average Shares, Class B common stock | ||||||||
Diluted net income (loss) per share | $ | $ | ( | ) |
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities approximate the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature.
The Company follows the guidance in ASC 820, “Fair Value Measurement,” for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1 - | Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment. |
Level 2 - | Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means. |
Level 3 - | Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
See Note 8 for additional information on assets and liabilities measured at fair value.
Recent Accounting Pronouncements
In August 2020, the FASB issued 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): 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 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.
F-13
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
Note 3 - Initial Public Offering
Public Units
On February 5, 2021, the Company
sold
Public Warrants
Each whole warrant entitles
the holder to purchase one share of the Company’s Class A common stock at a price of $
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 prospectus relating thereto is current, or valid exemption from registration is available. No warrant will be exercisable, and the Company will not be obligated to issue a share of Class A common stock upon exercise of a warrant unless the share of 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.
F-14
The Company has agreed that as soon as practicable, but in no event later than fifteen (15) business days after the closing of the initial Business Combination, it will use its reasonable best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A common stock issuable upon exercise of the warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the sixtieth (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 Class A common stock is 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 elects, 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 its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Once the warrants become exercisable, the Company may call the Public Warrants for redemption:
● | in whole and not in part; | |
● | at a price of $ | |
● | upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and | |
● | if, and only if, the last reported sale price of the Class A common stock equals or exceeds $ |
If the Company calls the warrants for redemption as described above, the Company will have the option to require any holder that wishes to exercise his, her or its warrant to do so on a “cashless basis.” If the Company takes advantage of this option, all holders of warrants would pay the exercise price by surrendering their warrants in exchange for a number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of (A) the number of shares of Class A common stock underlying the warrants and (B) the excess of the “fair market value” of the Company’s Class A common stock (defined in the next sentence) over the exercise price of the warrants by (y) the fair market value. The “fair market value” will mean the average last reported sales price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
Note 4 - Private Placement
Simultaneously with the closing
of the IPO, the Sponsor purchased an aggregate of
The Private Placement Warrants are identical to the Public Warrants sold in the IPO except that the Private Placement Warrants, so long as they are held by the initial stockholders or its permitted transferees, (i) they will not be redeemable by the Company for cash, (ii) they (including the Class A common stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold until 30 days after the completion of the Company’s initial Business Combination, and (iii) they may be exercised by the holders on a cashless basis. If the Private Placement Warrants are held by holders other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the warrants included in the Units sold in the IPO.
Note 5 - Related Party Transactions
Founder Shares
On November 25, 2020, the
Sponsor paid $
F-15
The Sponsor has agreed not to transfer, assign or sell any of its Founder Shares (subject to certain limited exceptions) until the earlier to occur of (i) one year after the completion of the Company’s initial Business Combination or (ii) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction after the initial Business Combination that results in all of the Company’s stockholders having the right to exchange their Class A common stock for cash, securities or other property (the “Lock-up”). Notwithstanding the foregoing, if (A) the last reported sales price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination or (B) the Company consummates a transaction after the initial Business Combination which results in its stockholders having the right to exchange their shares for cash, securities or other property, the Founder Shares will be released from the Lock-up.
Promissory Note - Related Party
On November 25, 2020, the
Company issued an unsecured promissory note to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount
of $
Related Party Loans
In order to fund working capital
deficiencies or finance transaction costs in connection with an intended initial Business Combination, the Sponsor or an affiliate of
the Sponsor or certain of the Company’s officers and directors or their respective affiliates may, but are not obligated to, loan
the Company funds as may be required on a non-interest basis (“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 of 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 agreed to pay
an affiliate of the Company’s Sponsor a monthly fee of $
Note 6 - Commitments and Contingencies
Registration and Stockholder Rights
The holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans will be entitled to registration rights pursuant to a registration rights agreement dated as of February 2, 2021, by and between the Company and the parties thereto, requiring the Company to register such securities and any other securities of the Company acquired by them prior to the consummation of the initial Business Combination for resale. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, the holders have certain “piggy-back” registration rights to include their securities in other registration statements filed by the Company.
F-16
Underwriting Agreement
The underwriters had a 45-day
option from the date of the IPO to purchase up to an aggregate of
The underwriters are entitled
to deferred underwriting fees of
Note 7 - Stockholders’ Equity (Deficit)
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 shares of Class B common
stock will automatically convert into shares of the Company’s Class A common stock at the time of the closing of its initial Business
Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the
like, and subject to further adjustment as provided 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 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,
Stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders. Holders of the Class A common stock and holders 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 except as required by law. Unless specified in the Company’s amended and restated certificate of incorporation, or as required by applicable provisions of the Delaware General Corporation Law or applicable stock exchange rules, the affirmative vote of a majority of the Company’s shares of common stock that are voted is required to approve any such matter voted on by the Company’s stockholders.
F-17
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 at December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
December 31, | 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 | $ | $ | $ | $ | ||||||||||||
Liabilities: | ||||||||||||||||
Public Warrants Liability | $ | $ | $ | $ | ||||||||||||
Private Placement Warrants Liability | ||||||||||||||||
$ | $ | $ | $ |
Transfers to/from Levels 1,
2 and 3 are recognized at the end of the reporting period. The estimated fair value of the Public Warrants of $
Warrant Liabilities
The Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the Balance Sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the Statements of Operations.
The Company established the initial fair value of the Public Warrants and Private Placement Warrants on February 5, 2021, the date of the Company’s IPO, using a Monte Carlo simulation model. The Public Warrants and Private Placement Warrants were classified as Level 3 at the initial measurement date. As of December 31, 2021, the Public Warrants were classified as Level 1 due to use of the observed trading price of the separated Public Warrants, and the Private Placement Warrants were classified as Level 3 due to the use of unobservable inputs.
The following table presents the changes in the fair value of Level 3 warrant liabilities for the year ended December 31, 2021:
Level 3 Warrant Liabilities | ||||
Fair Value as of December 31, 2020 | $ | |||
Initial measurement on February 5, 2021 | ||||
Transfer of Public Warrants to Level 1 | ( | ) | ||
Change in valuation as of December 31, 2021 | ( | ) | ||
Fair Value as of December 31, 2021 | $ |
Level 3 inputs have inherent uncertainties that are involved. If factors or assumptions change, the estimated fair values could be materially different. The key inputs into the Black-Scholes simulation as of December 31, 2021, were as follows:
Inputs | December 31, 2021 | |||
Risk-free interest rate | % | |||
Expected term remaining (years) | ||||
Expected volatility | % | |||
Underlying stock price | $ |
F-18
Note 9 - Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date the financial statements were issued. Based upon this evaluation, the Company did not identify any subsequent events that would have required adjustments or disclosure in the financial statements.
On February 25, 2022,
In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy are not determinable as of the date of these financial statements. The specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these financial statements.
F-19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: August 11, 2022 | THE MUSIC ACQUISITION CORPORATION | ||
By: | /s/ Neil Jacobson | ||
Name: | Neil Jacobson | ||
Title: | Chief Executive Officer | ||
(Principal Executive Officer) | |||
By: | /s/ Todd Lowen | ||
Name: | Todd Lowen | ||
Title: | Chief Financial Officer and Chief Operating Officer | ||
(Principal Financial Officer) |
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