UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Amendment No. 1
For the quarterly period ended
OR
(Exact name of registrant as specified in its charter)
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
(Address of principal executive offices, including zip code)
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Units, each consisting of one share of Class A common stock, $0.0001 par value per share, and one-quarter of one redeemable warrant | OHPAU | The Nasdaq Stock Market LLC | ||
| Warrants included as part of the units, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50 | OHPAW | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of February 17, 2022,
References throughout this Amendment No. 1 to the Quarterly Report on Form 10-Q to “we,” “us,” the “Company” or “our company” are to Orion Acquisition Corporation, unless the context otherwise indicates.
This Amendment No. 1 to the Quarterly Report on Form 10-Q/A for the quarterly period ended September 30, 2021 (this “Quarterly Report”) amends and restates certain terms in the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021 (the “Original Quarterly Report”) of Orion Acquisition Corp. as of and for the period ended September 30, 2021, as filed with the Securities and Exchange Commission (“SEC”) on November 10, 2021.
Background of Restatement
On November 10, 2021, Orion Acquisition Corporation (the “Company”) filed its Form 10-Q for the quarterly period ending September 30, 2021, which included a section within Note 2, Revision of Previously Reported Financial Statements, that described a revision to the Company’s classification of its Class A common stock subject to redemption issued as part of the units sold in the Company’s initial public offering (“IPO”) on March 4, 2021. As described in Note 2, upon its IPO, the Company classified a portion of the Class A common stock as permanent equity to maintain net tangible assets greater than $5,000,000 on the basis that the Company will consummate its initial business combination only if the Company has net tangible assets of at least $5,000,001. The Company’s management re-evaluated the application of ASC 480-10-S99-3A to its accounting classification of the redeemable Class A ordinary shares and revised this interpretation to include temporary equity in net tangible assets. As a result, management corrected the error by restating all Class A common stock subject to redemption as temporary equity. This resulted in an adjustment to the initial carrying value of the Class A common stock subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and Class A common stock.
In connection with the change in presentation for the Class A common stock subject to possible redemption, the Company revised its earnings per share calculation to allocate income and losses shared pro rata between the two classes of shares. This presentation differs from the previously presented method of earnings per share, which was similar to the two-class method.
The Company determined the changes were not qualitatively material to the Company’s previously issued financial statements and did not restate its financial statements. Instead, the Company revised its previously financial statements in Note 2 to its Original Quarterly Report. Although the qualitative factors that management assessed tended to support a conclusion that the misstatements were not material, these factors were not strong enough to overcome the significant quantitative errors in the financial statements. The qualitative and quantitative factors support a conclusion that the misstatements are material on a quantitative basis. Management concluded that the misstatement was such of magnitude that it is probable that the judgment of a reasonable person relying upon the financial statements would have been influenced by the inclusion or correction of the foregoing items. As such, upon further consideration of the change, the Company determined the change in classification of the Class A common stock and change to its presentation of earnings per share is material quantitatively and it should restate its previously issued financial statements.
Therefore, on November 29, 2021, the Company’s management and the audit committee of the Company’s board of directors concluded that the Company’s previously issued (i) unaudited interim financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021, filed with the SEC on May 24, 2021; and (ii) unaudited interim financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021, filed with the SEC on August 12, 2021, and (iii) Note 2 to the unaudited interim financial statements and Item 4 of Part 1 included in the Original Quarterly Report (collectively, the “Affected Periods”), should be restated to report all of the redeemable Class A common stock, par value $0.0001 per share, issued as part of the units sold in the IPO as temporary equity and should no longer be relied upon.
As such, the Company has restated the financial statements of the Affected Periods in this Quarterly Report on Form 10-Q/A. The financial information that has been previously filed or otherwise reported for this period is superseded by the information in this Quarterly Report, and the financial statements and related financial information contained in the Original Quarterly Report should no longer be relied upon. On November 29, 2021, the Company filed a Current Report on Form 8-K disclosing the non-reliance on the financial statements included in the Original Quarterly Report.
The Company does not expect any of the above changes will have any impact on its cash position and cash held in the trust account established in connection with the IPO.
Internal Control Considerations
In connection with the restatement, management has re-evaluated the effectiveness of the Company’s disclosure controls and procedures and internal control over financial reporting as of September 30, 2021, as the circumstances that led to the restatement of our financial statements had not yet been identified. The Company’s management has concluded that, in light of the errors described above, a material weakness exists in the Company’s internal control over financial reporting and that the Company’s disclosure controls and procedures were not effective as a result thereof. Management plans to enhance the system of evaluating and implementing the accounting standards that apply to our financial statements, including enhanced training of our personnel and increased communication among our personnel and third-party professionals with whom we consult regarding application of complex financial instruments. For a discussion of management’s consideration of our disclosure controls and procedures, internal controls over financial reporting, and the material weaknesses identified, see Part I, Item 4, “Controls and Procedures” of this Form 10-Q/A.
ORION ACQUISITION CORP.
Quarterly Report on Form 10-Q
Table of Contents
i
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
ORION ACQUISITION CORP.
CONDENSED BALANCE SHEETS
| September 30, 2021 | December 31, 2020 | |||||||
| (unaudited) | ||||||||
| Assets: | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Investments held in Trust Account | ||||||||
| Deferred offering costs | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Equity (Deficit): | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Due to related party | ||||||||
| Accrued expenses | ||||||||
| Franchise tax payable | ||||||||
| Note payable - related party | ||||||||
| Total current liabilities | ||||||||
| Deferred underwriting commissions | ||||||||
| Derivative warrant liabilities | ||||||||
| 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, Class A Common Stock Subject to Possible Redemption and Stockholders’ Equity (Deficit): | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
ORION ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
| For the Three Months Ended September 30, 2021 | For the Nine Months Ended September 30, 2021 | |||||||
| General and administrative expenses | $ | $ | ||||||
| General and administrative expenses - related party | ||||||||
| Franchise tax expense | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense) | ||||||||
| Financing costs - derivative warrant liabilities | ( | ) | ||||||
| Change in fair value of derivative warrant liabilities | ||||||||
| Gain (loss) on investments held in Trust Account | ( | ) | ||||||
| Net income | $ | $ | ||||||
| Weighted average shares outstanding of Class A common stock, basic and diluted | ||||||||
| Basic and diluted net income per share, Class A common stock | $ | $ | ||||||
| Weighted average shares outstanding of Class B common stock, basic | ||||||||
| Weighted average shares outstanding of Class B common stock, diluted | ||||||||
| Basic net income per share, Class B common stock | $ | $ | ||||||
| Diluted net income per share, Class B common stock | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
ORION ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
| Common Stock | Additional | Total | ||||||||||||||||||||||||||
| Class A | Class B | Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity (Deficit) | ||||||||||||||||||||||
| Balance - December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Excess of cash received over fair value of private placement warrants | - | - | ||||||||||||||||||||||||||
| Accretion of Class A common stock to redemption amount, as restated | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance - March 31, 2021 (unaudited), as restated | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance - June 30, 2021 (unaudited), as restated | $ | - | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Net income | - | - | - | |||||||||||||||||||||||||
| Balance - September 30, 2021 (unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
ORION ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
| Cash Flows from Operating Activities: | ||||
| Net income | $ | |||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||
| Change in fair value of derivative warrant liabilities | ( | ) | ||
| Financing costs - derivative warrant liabilities | ||||
| General and administrative expenses paid by related party under promissory note | ||||
| Gain on investments held in Trust Account | ( | ) | ||
| Changes in operating assets and liabilities: | ||||
| Prepaid expenses | ( | ) | ||
| Due to related party | ||||
| 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: | ||||
| Repayment of note payable to related party | ( | ) | ||
| Proceeds received from initial public offering, gross | ||||
| Proceeds received from private placement | ||||
| 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 accounts payable | $ | |||
| Offering costs included in accrued expenses | $ | |||
| Offering costs paid through note payable - related party | $ | |||
| Outstanding accounts payable paid by related party under promissory note | $ | |||
| Deferred underwriting commissions | $ | |||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
Orion Acquisition Corp
Notes to Unaudited Condensed Financial Statements
1. Description of Organization and Business Operations
Organization and General
Orion Acquisition Corp. (the “Company”) is a blank check company incorporated in Delaware on November 25, 2020, 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 emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.
As of September 30, 2021, the Company had not commenced any operations. All activity for the period from November 25, 2020 (inception) through September 30, 2021 relates to the Company’s formation, the preparation for the initial public offering (the “Initial Public Offering”) described below, and since the closing of the Initial Public Offering, the search for a prospective initial Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The Company’s sponsor is Orion Healthcare
Acquisition Partners, LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Company’s
Initial Public Offering was declared effective on March 1, 2021. On March 4, 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 the Private Placement Warrants,
although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There
is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial
Business Combinations having an aggregate fair market value of at least
5
Orion Acquisition Corp
Notes to Unaudited Condensed Financial Statements
The Company will provide the holders of the Public
Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion
of a Business Combination either
The Company will proceed with a Business Combination
if a majority of the shares voted are voted in favor of the Business Combination. The Company will not redeem the Public Shares in an
amount that would cause its net tangible assets to be less than $
The Amended and Restated Certificate of Incorporation
provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is
acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of
The Sponsor and the Company’s officers and
directors (the “Initial Stockholders”) agreed not to propose an amendment to the Amended and Restated Certificate of Incorporation
to modify the substance or timing of the Company’s obligation to redeem
If the Company is unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or March 4, 2023 (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 $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
6
Orion Acquisition Corp
Notes to Unaudited Condensed Financial Statements
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 6) held in the Trust Account in the event the Company does not complete a Business Combination within in the Combination Period
and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption
of the Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available
for distribution (including Trust Account assets) will be only $
Liquidity and Capital Resources
As of September 30, 2021, the Company had approximately
$
The Company’s liquidity needs to date have
been satisfied through a contribution of $
Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity from the Sponsor or an affiliate of the Sponsor, or certain of the Company’s 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, the Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
2. Restatement of Previously Reported Financial Statements
In preparation of the Company’s unaudited
condensed financial statements for the quarterly period ended September 30, 2021, the Company concluded it should restate its previously
issued financial statements to classify all Class A common stock subject to possible redemption in temporary equity. In accordance with
the SEC and its staff’s guidance on redeemable equity instruments in ASC 480-10-S99, redemption provisions not solely within the
control of the Company, require Class A common stock subject to redemption to be classified outside of permanent equity. The Company had
previously classified a portion of its Class A common stock in permanent equity. Although the Company did not specify a maximum redemption
threshold, its charter currently provides that the Company will not redeem its Public Shares in an amount that would cause its net tangible
assets to be less than $
In connection with the change in presentation for the Class A common stock subject to possible redemption, the Company has restated its earnings per share calculation to allocate income and losses shared pro rata between the two classes of shares. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of shares participate pro rata in the income and losses of the Company.
7
Orion Acquisition Corp
Notes to Unaudited Condensed Financial Statements
In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the corrections and has determined that the related impact was material to the previously filed financial statements that contained the error, reported in the Company’s Form 10-Qs for the quarterly periods ended March 31, 2021, and June 30, 2021 (the “Affected Quarterly Periods”). Therefore, the Company, in consultation with its Audit Committee, concluded that the Affected Quarterly Periods should be restated to present all Class A common stock subject to possible redemption as temporary equity and to recognize accretion from the initial book value to redemption value at the time of its Initial Public Offering, and restate earnings per share. As such, the Company is reporting the restatement to the Affected Quarterly Periods in this quarterly report. The previously presented Affected Quarterly Periods should no longer be relied upon.
The impact of the restatement on the financial statements for the Affected Quarterly Periods is presented below.
The table below presents the effect of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported unaudited condensed balance sheet as of March 31, 2021:
| As of March 31, 2021 (unaudited) | As Reported | Adjustment | As Restated | |||||||||
| Total assets | $ | $ | ||||||||||
| Total liabilities | $ | $ | ||||||||||
| Class A common stock subject to redemption | $ | |||||||||||
| Preferred stock | ||||||||||||
| Class A common stock | ( | ) | ||||||||||
| Class B common stock | ||||||||||||
| Additional paid-in capital | ( | ) | ||||||||||
| Retained earnings (accumulated deficit) | ( | ) | ( | ) | ||||||||
| Total stockholders’ equity (deficit) | $ | $ | ( | ) | $ | ( | ) | |||||
| Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders' Equity (Deficit) | $ | $ | $ | |||||||||
| Shares of Class A common stock subject to redemption | ||||||||||||
| Shares of Class A common stock | ( | ) | ||||||||||
The table below presents the effect of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported unaudited condensed statement of cash flows for the three months ended March 31, 2021:
| Three Months Ended March 31, 2021 (unaudited) | As Reported | Adjustment | As Restated | |||||||||
| Supplemental Disclosure of Noncash Financing Activities: | ||||||||||||
| Initial value of Class A common stock subject to possible redemption | $ | $ | ( | ) | $ | |||||||
| Change in value of Class A common stock subject to possible redemption | $ | $ | ( | ) | $ | |||||||
The table below presents the effect of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported unaudited condensed balance sheet as of June 30, 2021:
| As of June 30, 2021 (unaudited) | As Reported | Adjustment | As Restated | |||||||||
| Total assets | $ | $ | ||||||||||
| Total liabilities | $ | $ | ||||||||||
| Class A common stock subject to redemption | $ | |||||||||||
| Preferred stock | ||||||||||||
| Class A common stock | ( | ) | ||||||||||
| Class B common stock | ||||||||||||
| Additional paid-in capital | ||||||||||||
| Retained earnings (accumulated deficit) | ( | ) | ( | ) | ||||||||
| Total stockholders’ equity (deficit) | $ | $ | ( | ) | $ | ( | ) | |||||
| Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders' Equity (Deficit) | $ | $ | $ | |||||||||
| Shares of Class A common stock subject to redemption | ||||||||||||
| Shares of Class A common stock | ( | ) | ||||||||||
8
Orion Acquisition Corp
Notes to Unaudited Condensed Financial Statements
The table below presents the effect of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported unaudited condensed statement of cash flows for the six months ended June 30, 2021:
| Six Months Ended June 30, 2021 (unaudited) | As Reported | Adjustment | As Restated | |||||||||
| Supplemental Disclosure of Noncash Financing Activities: | ||||||||||||
| Initial value of Class A common stock subject to possible redemption | $ | $ | ( | ) | $ | |||||||
| Change in value of Class A common stock subject to possible redemption | $ | $ | ( | ) | $ | |||||||
The impact to the reported amounts of weighted average shares outstanding and basic and diluted earnings per common share is presented below for the Affected Quarterly Periods:
| Earnings Per Share | ||||||||||||
| As Reported | Adjustment | As Adjusted | ||||||||||
| Three months ended March 31, 2021 (unaudited) | ||||||||||||
| Net income | $ | $ | $ | |||||||||
| Weighted average shares outstanding - Class A common stock | ( | ) | ||||||||||
| Basic earnings per share - Class A common stock | $ | $ | $ | |||||||||
| Diluted earnings per share - Class A common stock | $ | $ | $ | |||||||||
| Weighted average shares outstanding, basic - Class B common stock | ||||||||||||
| Weighted average shares outstanding, diluted- Class B common stock | ||||||||||||
| Basic earnings per share - Class B common stock | $ | $ | ( | ) | $ | |||||||
| Diluted earnings per share - Class B common stock | $ | $ | ( | ) | $ | |||||||
| Three months ended June 30, 2021 (unaudited) | ||||||||||||
| Net income | $ | $ | $ | |||||||||
| Weighted average shares outstanding - Class A common stock | ||||||||||||
| Basic and diluted earnings per share - Class A common stock | $ | $ | $ | |||||||||
| Weighted average shares outstanding - Class B common stock | ||||||||||||
| Basic and diluted earnings per share - Class B common stock | $ | $ | ( | ) | $ | |||||||
| Six months ended June 30, 2021 (unaudited) | ||||||||||||
| Net income | $ | $ | $ | |||||||||
| Weighted average shares outstanding - Class A common stock | ( | ) | ||||||||||
| Basic and diluted earnings per share - Class A common stock | $ | $ | $ | |||||||||
| Weighted average shares outstanding, basic - Class B common stock | ||||||||||||
| Weighted average shares outstanding, diluted- Class B common stock | ||||||||||||
| Basic and diluted earnings per share - Class B common stock | $ | $ | ( | ) | $ | |||||||
3. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included. Operating results for the period from three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the period ending December 31, 2021 or any future period.
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 March 3, 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.
9
Orion Acquisition Corp
Notes to Unaudited Condensed Financial Statements
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 unaudited condensed 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 unaudited condensed financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements.
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 unaudited condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. 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 has no cash equivalents held outside the Trust Account as of September 30, 2021 and December 31, 2020.
Investments Held in 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 gain 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.
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal
Depository Insurance Corporation coverage limit of $
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,” equal or approximate the carrying amounts represented in the condensed balance sheets.
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. U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.
10
Orion Acquisition Corp
Notes to Unaudited Condensed Financial Statements
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 consist of:
| ● | Level 1, defined as observable inputs such as quoted prices 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.
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 warrants issued in connection with the Initial Public Offering (the “Public Warrants”) and the 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 adjust the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s unaudited condensed statements of operations. The fair value of warrants issued by the Company in connection with the Initial Public Offering and Private Placement have initially been estimated using Monte-Carlo simulations at each measurement date. The Private Placement warrants continue to be estimated using Monte Carlo simulations. As of September 30, 2021, the fair value of the Public Warrants was estimated at their listed public trading price. The determination of the fair value of the warrant liabilities 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.
Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting,
underwriting fees and other costs incurred 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 warrant liabilities are expensed as incurred and presented as non-operating expenses in the unaudited
condensed statements of operations. Offering costs associated with the Public Shares were charged against the carrying value of the Class
A common stock subject to possible redemption upon the completion of the Initial Public Offering. Of the total offering costs of the Initial
Public Offering, approximately $
11
Orion Acquisition Corp
Notes to Unaudited Condensed Financial Statements
Class A Common Stock Subject to Possible Redemption
Class A common stock subject to mandatory redemption
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 September 30, 2021, and December 31, 2020,
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.
Income Taxes
The Company follows the asset and liability method
of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for
the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances
are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. As of September 30, 2021, the Company
had deferred tax assets of approximately $
FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of September 30, 2021 or December 31, 2020. 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 September 30, 2021 or December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
Net Income (Loss) Per Share of Common Stock
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per common share is calculated by dividing the net income (loss) by the weighted average shares of common stock outstanding for the respective period.
The calculation of diluted net income (loss) per
common stock does not consider the effect of the warrants issued in connection with the Initial Public Offering and the Private Placement
to purchase an aggregate of
12
Orion Acquisition Corp
Notes to Unaudited Condensed Financial Statements
The following table reflects presents a reconciliation of the numerator and denominator used to compute basic and diluted net income (loss) per share for each class of common stock:
| For
the Three Months Ended September 30, 2021 | For
the Nine Months Ended September 30, 2021 | |||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Basic and diluted net income per share of common stock: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net income - basic | $ | $ | $ | $ | ||||||||||||
| Allocation of net income - diluted | $ | $ | $ | $ | ||||||||||||
| Denominator: | ||||||||||||||||
| Basic weighted average common shares outstanding | ||||||||||||||||
| Diluted weighted average common shares outstanding | ||||||||||||||||
| Basic net income per share of common stock | $ | $ | $ | $ | ||||||||||||
| Diluted net income per share of common stock | $ | $ | $ | $ | ||||||||||||
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard 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, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, and it also simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on January 1, 2021, with no material impact upon adoption.
The Company does not believe that any recently issued, but not yet effective, accounting standards updates, if currently adopted, would have a material effect on the accompanying unaudited condensed financial statements.
4. Initial Public Offering
On March 4, 2021, the Company consummated its
Initial Public Offering of
Each Unit consists of one share of Class A common
stock and one-quarter 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 $
5. Related Party Transactions
Founder Shares
On December 9, 2020, the Sponsor paid an aggregate
of $
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: (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the closing price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the stockholders having the right to exchange their shares of common stock for cash, securities or other property.
13
Orion Acquisition Corp
Notes to Unaudited Condensed Financial Statements
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
Related Party Loans
On December 8, 2020, the Sponsor agreed to loan
the Company an aggregate of up to $
In addition, in order to finance transaction costs
in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and
directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company
completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released
to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that
a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital
Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms
of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working
Capital Loans would either be repaid upon consummation of a Business Combination or, at the lenders’ discretion, up to $
Administrative Services Agreement
Commencing on the effective date of the prospectus
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 Company’s officers or directors 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, officers or directors, or the Company’s or their affiliates. Any such payments prior to an initial Business Combination will be made using funds held outside the Trust Account. Other than quarterly audit committee review of such payments, the Company does not expect to have any additional controls in place governing the reimbursement payments to the Company’s directors and officers for their out-of-pocket expenses incurred in connection with identifying and consummating an initial Business Combination.
14
Orion Acquisition Corp
Notes to Unaudited Condensed Financial Statements
6. Commitments and Contingencies
Registration Rights
The Initial Stockholders and holders of the Private Placement Warrants were entitled to registration rights pursuant to a registration rights agreement. The Initial Stockholders and holders of the Private Placement Warrants will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include their securities in other registration statements filed by the Company. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
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 statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
7. Derivative Warrant Liabilities
There were no warrants outstanding as of December
31, 2020. As of September 30, 2021, there were
Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (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 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 20 business days after the closing of the initial Business Combination, it will use its commercially reasonable efforts to file with the SEC and have an effective registration statement covering the shares of the Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of the Class A common stock until the warrants expire or are redeemed. If a registration statement covering the shares of 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.
15
Orion Acquisition Corp
Notes to Unaudited Condensed Financial Statements
The warrants have an exercise price of $
The Private Placement Warrants are 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. 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; and |
The Company will not redeem the warrants as described above unless an effective registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the warrants is effective and a current prospectus relating to those shares of Class A common stock is available throughout the 30-day redemption period. Any such exercise would not be on a “cashless” basis and would require the exercising holder to pay the exercise price for each warrant being exercised.
Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00:
Commencing ninety days after 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, but only 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; |
16
Orion Acquisition Corp
Notes to Unaudited Condensed Financial Statements
| ● | if, and only if, the closing price of Class A common stock equals or exceeds $10.00 per share (as adjusted) for any 20 trading days within the 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders; and |
The “fair market value” of Class A
common stock for the above purpose shall mean the volume-weighted average price of Class A common stock during the 10 trading days ending
on the third trading day 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.
8. Class A Common Stock Subject to Possible Redemption
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 the occurrence of future events.
The Company is authorized to issue
The Class A common stock subject to possible redemption reflected on the condensed balance sheet is reconciled on the following table:
| Gross proceeds | $ | |||
| Less: | ||||
| Amount 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 | $ |
9. Stockholders’ Deficit
Preferred stock - The Company is
authorized to issue
Class A Common Stock - The Company
is authorized to issue
17
Orion Acquisition Corp
Notes to Unaudited Condensed Financial Statements
Class B Common Stock - The Company
is authorized to issue
Only holders of the Class B common stock will have the right to vote on the election of directors prior to the Business Combination. Holders of Class A common stock and holders of Class B common stock will vote together as a single class on all other matters submitted to a vote of the stockholders except as required by law.
The Class B common stock will automatically convert
into Class A common stock at the time of the initial Business Combination on a one-for-one basis, subject to adjustment for stock splits,
stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment as 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 offered in
the Initial Public Offering and related to the closing of the initial Business Combination, the ratio at which shares of Class B common
stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of
Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares
of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted
basis,
10. 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 September 30, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
| Quoted Prices in | Significant Other | Significant Other | ||||||||||
| Active Markets | Observable Inputs | Unobservable Inputs | ||||||||||
| Description | (Level 1) | (Level 2) | (Level 3) | |||||||||
| Assets | ||||||||||||
| Assets held in Trust Account: | ||||||||||||
| U.S. Treasury securities | $ | $ | $ | |||||||||
| Cash and cash equivalents - mutual funds | ||||||||||||
| $ | $ | $ | ||||||||||
| Liabilities | ||||||||||||
| Derivative warrant liabilities - Public Warrants | $ | $ | $ | - | ||||||||
| Derivative warrant liabilities - Private 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 end of the reporting period. The estimated fair value of Public Warrants was transferred from a Level 3 measurement to a Level 1 measurement as the Public Warrants were separately traded beginning in April 2021. There were no other transfers to/from Levels 1, 2, and 3 during the three and nine months ended September 30, 2021.
Level 1 assets include investments in money market funds and U.S. Treasury securities. The Company uses inputs such as actual trade data, benchmark yields, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments. Level 3 instruments are comprised of derivative warrant liabilities measured at fair value using a Monte Carlo simulation model.
18
Orion Acquisition Corp
Notes to Unaudited Condensed Financial Statements (As Restated)
The fair value of warrants issued by the Company
in connection with the Initial Public Offering and Private Placement have initially been estimated using Monte-Carlo simulations at each
measurement date. The Private Placement Warrants continue to be estimated using Monte Carlo simulations. As of September 30, 2021, the
fair value of the Public Warrants was estimated at their listed public trading price. For the three and nine months ended September 30,
2021, the Company recognized a gain in the unaudited condensed statements of operations resulting from a decrease in the fair value of
derivative warrant liabilities of $
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 Monte Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock warrants based on implied volatility from the Company’s traded warrants and from historical volatility of select peer company’s common stock that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.
The following table provides quantitative information regarding Level 3 fair value measurements inputs as their measurement dates:
| As of September 30, 2021 | ||||
| Volatility | % | |||
| Stock price | $ | |||
| Expected life of the options to convert | ||||
| Risk-free rate | % | |||
| Dividend yield | % | |||
The change in the fair value of the derivative warrant liabilities measured with Level 3 inputs for the three and nine months ended September 30, 2021 is summarized as follows:
| Derivative warrant liabilities at January 1, 2021 | $ | |||
| Issuance of Public and Private Warrants - Level 3 | ||||
| Change in fair value of derivative warrant liabilities - Level 3 | ( | ) | ||
| Derivative warrant liabilities at March 31, 2021 - Level 3 | $ | |||
| Transfer of Public Warrants to Level 1 | $ | ( | ) | |
| Change in fair value of derivative warrant liabilities - Level 3 | ( | ) | ||
| Derivative warrant liabilities at June 30, 2021 - Level 3 | $ | |||
| Change in fair value of derivative warrant liabilities - Level 3 | ( | ) | ||
| Derivative warrant liabilities at September 30, 2021 - Level 3 | $ |
11. Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the unaudited condensed balance sheet date up to the date that the unaudited condensed financial statements were issued. Based upon this review, other than the restatement in Note 2, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “our,” “us” or “we” refer to Orion Acquisition Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
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 Securities Exchange Act of 1934, as amended (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. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-Q. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.
Overview
We are a blank check company incorporated on November 25, 2020 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). Our sponsor is Orion Healthcare Acquisition Partners, LLC, a Delaware limited liability company (the “Sponsor”).
Our registration statement for the initial public offering (the “Initial Public Offering”) was declared effective on March 1, 2021. On March 4, 2021, we consummated our Initial Public Offering of 41,400,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”), including 5,400,000 additional Units to cover over-allotments (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of $414.0 million, and incurring offering costs of approximately $23.5 million, inclusive of approximately $14.5 million in deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 7,520,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant in a private placement to our Sponsor, generating proceeds of $11.3 million.
Upon the closing of the Initial Public Offering and the Private Placement, $414.0 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 (the “Trust Account”) and will be invested in permitted United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended, which we refer to as the Investment Company Act, having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act that invest only in direct U.S. government treasury obligations.
We will only have 24 months from the closing of the Initial Public Offering, or March 4, 2023, to complete our initial Business Combination (the “Combination Period”). If we do not complete a Business Combination within this period of time, it will (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the Public Shares for a per share pro rata portion of the Trust Account, including interest and not previously released to us to fund our working capital requirements (subject to an annual limit of $500,000) (less taxes payable and up to $100,000 of such net interest to pay dissolution expenses) and (iii) as promptly as possible following such redemption, liquidate and dissolve the balance of our net assets to our remaining stockholders, as part of our plan of dissolution and liquidation.
20
The issuance of additional shares in connection with a business combination to the owners of the target or other investors:
| ● | may significantly dilute the equity interest of investors in this offering, which dilution would increase if the anti-dilution provisions in the Class B common stock resulted in the issuance of Class A common stock on a greater than one-to-one basis upon conversion of the Class B common stock; |
| ● | may subordinate the rights of holders of Class A common stock if shares of preferred stock are issued with rights senior to those afforded our Class A common stock; |
| ● | could cause a change in control if a substantial number of shares of our Class A common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; |
| ● | may have the effect of delaying or preventing a change of control of us by diluting the share ownership or voting rights of a person seeking to obtain control of us; and |
| ● | may adversely affect prevailing market prices for our units, Class A common stock and/or warrants. |
Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:
| ● | default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations; |
| ● | acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
| ● | our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand; |
| ● | our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding; |
| ● | our inability to pay dividends on our Class A common stock; |
| ● | using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our Class A common stock if declared, expenses, capital expenditures, acquisitions and other general corporate purposes; | |
| ● | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
| ● | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and |
| ● | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt. |
As indicated in the accompanying unaudited condensed financial statements, as of September 30, 2021, we had approximately $0.8 million in our operating bank account. We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete our initial Business Combination will be successful.
Results of Operations
Our entire activity since November 25, 2020 (inception) through September 30, 2021 related to our formation, the preparation for the Initial Public Offering, and since the closing of the Initial Public Offering, the search for a prospective initial Business Combination. We have neither engaged in any operations nor generated any revenues to date. We will not generate any operating revenues until after completion of our initial Business Combination. We generate non-operating income in the form of interest income on investments held in the Trust Account. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended September 30, 2021, we had net income of approximately $4.7 million, which consisted of a gain of approximately $5.5 million from changes in fair value of derivative warrant liabilities, offset by approximately $5,000 in losses on investments held in the Trust Account, approximately $792,000 in general and administrative expenses, and approximately $51,000 in franchise tax expenses.
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For the nine months ended September 30, 2021, we had net income of approximately $11.4 million, which consisted of approximately $14,000 in gain on investments held in the Trust Account and a gain of approximately $13.5 million from changes in fair value of derivative warrant liabilities, offset by approximately $1.2 million in general and administrative expenses, approximately $816,000 in financing costs - derivative warrant liabilities and approximately $149,000 in franchise tax expenses.
Liquidity and Capital Resource
As of September 30, 2021, we had approximately $0.8 million in its operating bank account, working capital of approximately $1.0 million, not taking into account tax obligations of approximately $149,000 that may be paid from income from investments held in the Trust Account.
Our liquidity needs to date have been satisfied through a $25,000 contribution from our Sponsor in exchange for the issuance of our founder shares to our Sponsor, the promissory note (the “Note”) of $136,000 from our Sponsor, and the proceeds from the consummation of the Private Placement not held in the Trust Account. On March 8, 2021, we repaid the Note in full to our Sponsor which resulted in the Note no longer being available. In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors may, but are not obligated to, provide the Company Working Capital Loans. As of September 30, 2021, there were no amounts outstanding under any Working Capital Loan.
Based on the foregoing, our 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 our needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, we will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
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 statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Related Party Transactions
Founder Shares
On December 9, 2020, our Sponsor paid an aggregate of $25,000 to cover certain expenses and offering costs on behalf of us in exchange for issuance of 8,625,000 shares of our Class B common stock, par value $0.0001 per share (the “Founder Shares”). On March 1, 2021, we effected a share capitalization of 1,725,000 shares of Class B common stock, resulting in an aggregate of 10,350,000 shares of Class B common stock issued and outstanding.
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: (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the closing price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, we consummated the Private Placement of 7,520,000 Private Placement Warrants at a price of $1.50 per Private Placement Warrant to our Sponsor, generating proceeds of approximately $11.3 million.
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Each whole Private Placement Warrant is exercisable for one whole share of Class A common stock at a price of $11.50 per share. A portion of the proceeds from the sale of the Private Placement Warrants to our Sponsor was added to the proceeds from the Initial Public Offering held in the Trust Account. If we do not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable for cash and exercisable on a cashless basis so long as they are held by our Sponsor or its permitted transferees.
Our Sponsor and our 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.
Related Party Loans
On December 8, 2020, our Sponsor agreed to loan us an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Note”). This loan was non-interest bearing and payable upon the completion of the Initial Public Offering. As of March 4, 2021, we borrowed approximately $136,000 under the Note. On March 8, 2021, we repaid the Note in full.
In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors may, but are not obligated to, loan us funds as may be required (“Working Capital Loans”). If we complete a Business Combination, we would repay the Working Capital Loans out of the proceeds of the Trust Account released to us. 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, we may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination or, at the lenders’ discretion, up to $2.25 million of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants. As of September 30, 2021, there were no borrowings under the Working Capital Loans.
Administrative Services Agreement
Commencing on the effective date of the prospectus through the earlier of consummation of the initial Business Combination and our liquidation, we agreed to pay our Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. We incurred approximately $30,000 and approximately $70,000 in expenses in connection with such services during the three and nine months ended September 30, 2021, respectively, as reflected in the accompanying unaudited condensed statements of operation. As of September 30, 2021, approximately $70,000 is due and included in accrued expenses on the condensed balance sheet.
Our officers or directors 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 our Sponsor, officers or directors, or to us and our affiliates. Any such payments prior to an initial Business Combination will be made using funds held outside the Trust Account. Other than quarterly audit committee review of such payments, we do not expect to have any additional controls in place governing the reimbursement payments to our directors and officers for their out-of-pocket expenses incurred in connection with identifying and consummating an initial Business Combination.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities, other than an agreement to pay our Sponsor a monthly fee of $10,000 for office space, secretarial and administrative services.
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Registration Rights
The initial stockholders and holders of the Private Placement Warrants were entitled to registration rights pursuant to a registration rights agreement. The initial stockholders and holders of the Private Placement Warrants will be entitled to make up to three demands, excluding short form registration demands, that we register such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include their securities in other registration statements filed by us. 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 to purchase up to 5,400,000 additional Units to cover any over-allotment, at the Initial Public Offering price less the underwriting discounts and commissions. The warrants that would be issued in connection with the 5,400,000 over-allotment Units are identical to the public warrants and have no net cash settlement provisions. The underwriters exercised the over-allotment option in full on March 4, 2021.
Critical Accounting Policies
This management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed financial statements, which have been prepared in accordance with GAAP. The preparation of our unaudited condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our unaudited condensed financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have identified the following as its critical accounting policies:
Investments Held in the Trust Account
Our 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 our investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When our 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 gain 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.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our 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 warrants issued in connection with the Initial Public Offering (the “Public Warrants”) and the 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, and any change in fair value is recognized in our unaudited condensed statements of operations. The fair value of warrants issued by us in connection with the Initial Public Offering and Private Placement have initially been estimated using Monte-Carlo simulations at each measurement date. The Private Placement warrants continue to be estimated using Monte Carlo simulations. As of September 30, 2021, the fair value of the Public Warrants was estimated at their listed public trading price. 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 Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) is classified as liability instruments and are measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that features 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 is 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 the occurrence of uncertain future events. Accordingly, as of September 30, 2021, and December 31, 2020, 41,400,000 and 0 shares of Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of our condensed balance sheets, respectively.
We recognize 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, we 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.
Net Income (Loss) Per Common Share
We complied with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” We have two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per common share is calculated by dividing the net income (loss) by the weighted average shares of common stock outstanding for the respective period.
The calculation of diluted net income (loss) per common stock does not consider the effect of the warrants issued in connection with the Initial Public Offering and the Private Placement to purchase an aggregate of 17,870,000 shares of common stock in the calculation of diluted income (loss) per share, because their exercise is contingent upon future events. As a result, diluted net income (loss) per share is the same as basic net income (loss) per share for the three and nine months ended September 30, 2021. Accretion associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard 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, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, and it also simplifies the diluted earnings per share calculation in certain areas. We adopted ASU 2020-06 on January 1, 2021, with no material impact upon adoption.
We do not believe that any recently issued, but not yet effective, accounting standards updates, if currently adopted, would have a material effect on the accompanying unaudited condensed financial statements.
Off-Balance Sheet Arrangements
As of September 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
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JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” under the JOBS Act and are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We elected 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, our unaudited condensed financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
As an “emerging growth company”, we are not 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 unaudited condensed 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 the 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.
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 September 30, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer has concluded that during the period covered by this report, our disclosure controls and procedures were not effective as of September 30, 2021, because of a material weakness in our internal control over financial reporting. 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 the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, the Company’s management has concluded that its control around accounting for complex financial instruments was not effectively designed or maintained. This material weakness resulted in the misstatement of the Company’s interim financial statements for the quarters ended March 31, 2021, June 30, 2021 and September 30, 2021.
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
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 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, as the circumstances that led to the restatement described in this Quarterly Report on Form 10-Q/A had not been identified.
Our principal executive officer and principal financial officer performed additional accounting and financial analyses and other post-closing procedures including consulting with subject matter experts related to the accounting for certain complex financial instruments. The Company’s management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation and improvement of our internal control over financial reporting. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we have enhanced and will continue to improve these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our final prospectus for our Initial Public Offering filed with the SEC on March 3, 2021 and in our Form 10-Q for the period ended March 31, 2021 filed with the SEC on May 24, 2021. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our final prospectus for our Initial Public Offering filed with the SEC March 3, 2021, in our Form 10-Q for the period ended March 31, 2021 filed with the SEC on May 24, 2021 and in our Form 10-Q for the period ended June 30, 2021 filed with the SEC on August 12, 2021, except for the following:
We have identified a material weakness in our internal control over financial reporting as of September 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 adversely affect investor confidence in us and materially and adversely affect our business and operating results.
As described elsewhere in this Quarterly Report on Form 10-Q/A, we have identified a material weakness in our internal control over financial reporting related to the Company’s accounting and reporting of complex financial instruments, including application of ASC 480-10-S99-3A to its accounting classification of public shares. As a result of this material weakness, our management has concluded that our disclosure controls and procedures were not effective as of September 30, 2021. See Note 2 to the accompanying financial statements, as well as Part I. Item 4. Controls and Procedures included in this Quarterly Report on Form 10-Q/A. We have taken a number of measures to remediate the material weaknesses described herein. However, if we are unable to remediate our material weaknesses in a timely manner or we identify additional material weaknesses, we may be unable to provide required financial information in a timely and reliable manner and we may incorrectly report financial information. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our shares of Class A common stock are listed, the SEC or other regulatory authorities. The existence of material weaknesses in internal control over financial reporting could adversely affect our reputation or investor perceptions of us, which could have a negative effect on the trading price of our shares. We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. Even if we are successful in strengthening our controls and procedures, in the future those controls, and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.
Previously, following this issuance of the SEC Statement on April 12, 2021, our management and our audit committee concluded that, in light of the SEC Statement, we identified a material weakness in our internal controls over financial reporting as it related to the proper accounting classification warrants.
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 and corrected on a timely basis.
Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects.
If we identify any new material weaknesses in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and our share price may decline as a result. We cannot assure you that any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.
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We may face litigation and other risks as a result of the material weakness in our internal control over financial reporting.
As a result of the material weakness in our internal control over financial reporting and restatement of our financial statements, 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 restatement and material weaknesses in our internal control over financial reporting and the preparation of our financial statements. As of the date of this Quarterly 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 an initial business combination.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities
On March 4, 2021, we consummated the Initial Public Offering of 41,400,000 Units. The Units sold in the Initial Public Offering were sold at an offering price of $10.00 per unit, generating total gross proceeds of $414,000,000. Credit Suisse Securities (USA) LLC acted as sole book-running manager. The securities in the offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333-253081). The Securities and Exchange Commission declared the registration statement effective on March 1, 2021.
Simultaneously with the consummation of the Initial Public Offering, we consummated the Private Placement of 7,520,000 Private Placement Warrants at a price of $1.50 per Private Placement Warrant, generating proceeds of $11,280,000 million. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The Private Placement Warrants are 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. 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.
Of the gross proceeds received from the Initial Public Offering and the Private Placement Warrants, $414,000,000 was placed in the Trust Account.
We paid a total of $8,280,000 in underwriting discounts and commissions and approximately $9,100,000 for offering costs related to the Initial Public Offering. In addition, the underwriters agreed to defer $14,490,000 million in underwriting discounts and commissions.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
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Item 5. Other Information
None.
Item 6. Exhibits.
| * | Filed herewith. |
| ** | 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 on this 17th day of February, 2022.
| ORION ACQUISITION CORP. | |||
| By: | /s/ Beau Garverick | ||
| Name: | Beau Garverick | ||
| Title: | Chief Executive Officer & Chief Financial Officer | ||
| Dated: February 17, 2022 | |||
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