UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For the quarterly period ended
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (1.R.S. Employer Identification No.) |
(Address of principal executive offices, including zip code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Units, each consisting of one share of Class A common stock and one-third of one redeemable public warrant | MBAC.U | New York Stock Exchange | ||
| Public warrants, each whole public warrant exercisable for one share of Class A common stock at an exercise price of $11.50 per share | MBAC.WS | New York Stock Exchange |
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of November 14, 2022,
M3-BRIGADE ACQUISITION II CORP.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2022
TABLE OF CONTENTS
i
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements.
M3-BRIGADE ACQUISITION II CORP.
CONDENSED BALANCE SHEETS
| September 30, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses and other current assets | ||||||||
| Prepaid insurance – short term | ||||||||
| Total current assets | ||||||||
| Investment and marketable securities held in trust | ||||||||
| Prepaid insurance – long term portion | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES, CLASS A COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accrued expenses | $ | $ | ||||||
| Accrued terminated merger transaction costs | ||||||||
| Income taxes payable | — | |||||||
| Due to affiliates | ||||||||
| Total current liabilities | ||||||||
| Warrant liability | ||||||||
| Deferred underwriters discount | ||||||||
| Total liabilities | ||||||||
| Commitments | ||||||||
| Class A Common Stock subject to possible redemption, | ||||||||
| Stockholders’ Deficit | ||||||||
| Preferred shares, $ | ||||||||
| Class B common shares. $ | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES, CLASS A COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
1
M3-BRIGADE ACQUISITION II CORP.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Formation and operating costs | $ | $ | $ | $ | ||||||||||||
| Terminated merger transaction costs (costs waived) | ( | ) | ||||||||||||||
| (Loss) Income from operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Other income (expense): | ||||||||||||||||
| Change in fair value of warrant liabilities | ( | ) | ||||||||||||||
| Excess fair value of private placement warrants over consideration paid | ( | ) | ||||||||||||||
| Change in fair value of overallotment liability | ||||||||||||||||
| Transaction costs | ( | ) | ||||||||||||||
| Unrealized gain on investments | ||||||||||||||||
| Total Other income (expense), net | ( | ) | ( | ) | ||||||||||||
| Income (Loss) before provision for income taxes | ( | ) | ( | ) | ||||||||||||
| Provision for income taxes | ( | ) | ( | ) | ||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| $ | $ | ( | ) | $ | $ | ( | ) | |||||||||
| $ | $ | ( | ) | $ | $ | ( | ) | |||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
2
M3-BRIGADE ACQUISITION II CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
| Class A Common Shares Subject to Possible | Class B | Additional | Total | |||||||||||||||||||||||||
| Redemption | Common Shares | Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance – December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance – March 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance – June 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Remeasurement to shares subject to possible redemption | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance – September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
| Class A Common Shares Subject to Possible | Class B | Additional | Total | |||||||||||||||||||||||||
| Redemption | Common Shares | Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance – December 31, 2020 | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Sale of | ||||||||||||||||||||||||||||
| Offering costs | — | ( | ) | — | ||||||||||||||||||||||||
| Fair value Public warrants at inception | — | ( | ) | — | ||||||||||||||||||||||||
| Fair value of overallotment option at inception | — | ( | ) | — | ||||||||||||||||||||||||
| Remeasurement to shares subject to possible redemption | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – March 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Forfeiture of Class B Shares | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance – June 30, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
3
M3-BRIGADE ACQUISITION II CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Unrealized gain on marketable securities held in Trust Account | ( | ) | ( | ) | ||||
| Excess fair value of private placement warrants over consideration paid | ||||||||
| Change in fair value of warrant liabilities | ( | ) | ( | ) | ||||
| Change in fair value of overallotment option | ( | ) | ||||||
| Transaction costs allocable to liability instruments - warrants and over-allotment liabilities | ||||||||
| Terminated merger transaction costs waived | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expense and other assets | ( | ) | ( | ) | ||||
| Prepaid insurance – short term | ||||||||
| Prepaid insurance – long term | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Accrued terminated merger transaction costs | ( | ) | ||||||
| Income taxes payable | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Investments and marketable securities held in trust | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from related party advances | ||||||||
| Repayment of related party advances | ( | ) | ||||||
| Proceeds from sale of Units, net of offering costs | ||||||||
| Proceeds from sale of Founder Shares | ||||||||
| Proceeds from sales of Private Placement Warrants | ||||||||
| Payment of underwriter’s discount | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net Change in Cash | ( | ) | ||||||
| Cash – Beginning of period | ||||||||
| Cash – End of period | $ | $ | ||||||
| Non-Cash investing and financing activities: | ||||||||
| Accretion for Class A common shares to redemption amount | $ | $ | ||||||
| Deferred underwriting fee payable | $ | $ | ||||||
| Terminated merger transaction costs waived | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
4
M3-BRIGADE ACQUISITION II CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS AND GOING CONCERN
M3-Brigade Acquisition II Corp. (the “Company”)
is a newly organized blank check company incorporated as a Delaware corporation on December 16, 2020. The Company was formed for the purpose
of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with
one or more businesses (“Business Combination”). On August 16, 2021, the Company entered into an Agreement and Plan of Merger
with Syniverse Corporation. On February 9, 2022, the proposed transaction with Syniverse Corporation was terminated. The Company incurred
$
The Company has selected December 31 as its fiscal year end.
As of September 30, 2022, the Company had not commenced any operations. All activity for the period from December 16, 2020 (inception) through September 30, 2022 relates to the Company’s formation and its initial public offering (“IPO”), which is described below, and its activities relating to the sourcing of an initial Business Combination. The Company believes it will not generate any operating revenue until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the IPO and unrealized gains and losses on the change in fair value of its warrants.
The Company’s sponsor is M3-Brigade Sponsor II LP, a Delaware limited liability company (the “Sponsor”).
The registration statement for the Company’s
IPO was declared effective on March 3, 2021 (the “Effective Date”). On March 8, 2021, the Company consummated the IPO of
The underwriters had a
Simultaneously with the closing of the IPO, the
Company consummated the sale of
Transaction costs of the IPO amounted to $
Following the closing of the IPO on March 8, 2021,
$
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the IPO, although substantially all of the net proceeds of the IPO are
intended to be generally applied toward consummating a Business Combination with (or acquisition of) a Target Business. As used herein,
“Target Business” must be with one or more target businesses that together have a fair market value equal to at least
5
The Company, after signing a definitive agreement
for a Business Combination, will either (i) seek stockholder approval of the Business Combination at a meeting called for such purpose
in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or against the Business Combination,
for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the
consummation of the initial Business Combination, including interest but less taxes payable, or (ii) provide stockholders with the opportunity
to sell their shares to the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount in cash
equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to commencement
of the tender offer, including interest but less taxes payable. The decision as to whether the Company will seek stockholder approval
of the Business Combination or will allow stockholders to sell their shares in a tender offer will be made by the Company, solely in its
discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would
otherwise require the Company to seek stockholder approval unless a vote is required by stock exchange rules. If the Company seeks stockholder
approval, it will complete its Business Combination only if a majority of the outstanding shares of common stock voted are voted in favor
of the Business Combination. However, in no event will the Company redeem its public shares in an amount that would cause its net tangible
assets to be less than $
If the Company holds a stockholder vote or there is a tender offer for shares in connection with a Business Combination, a public stockholder will have the right to redeem its shares for an amount in cash equal to its pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest but less taxes payable. As a result, such shares of common stock will be recorded at redemption amount and classified as temporary equity prior to the consummation of such initial Business Combination, in accordance with FASB ASC 480, “Distinguishing Liabilities from Equity.”
The Company will only have 24 months from the
closing date of the IPO (March 8, 2023) to complete its initial Business Combination. If the Company does not complete a Business Combination
within this period of time, it shall (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 of common stock for a per share pro rata portion of the Trust
Account, including interest, but less taxes payable (less up to $
The initial stockholders have entered into letter agreements with the Company, pursuant to which they have waived their rights to participate in any redemption with respect to their initial shares; however, if the initial stockholders or any of the Company’s officers, directors or affiliates acquire shares of Class A common stock in or after the IPO, they will be entitled to a pro rata share of the Trust Account with respect to such acquired shares of Class A common stock upon the Company’s redemption or liquidation in the event the Company does not complete a Business Combination within the required time period.
In the event of such redemption, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per Unit in the IPO.
The Company’s Sponsor has agreed that it
will be liable to the Company if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a
prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in
the trust account to below (i) $
Risks and Uncertainties
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak on the Company’s financial position will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s financial position may be materially adversely affected. Additionally, the Company’s ability to complete an initial Business Combination may be materially adversely affected due to significant governmental measures that may be implemented to contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit the Company’s ability to have meetings with potential targets or investors, or affect the ability of a potential target company’s personnel, vendors and service providers to negotiate and consummate an initial Business Combination in a timely manner. The Company’s ability to consummate an initial Business Combination may also be dependent on the ability to raise additional equity and debt financing, which may be impacted by the COVID-19 outbreak and the resulting direct and indirect impacts thereof upon the financial markets. The financial statement does not include any adjustments that might result from the outcome of this uncertainty.
6
In February 2022, the Russian Federation launched a military campaign against Ukraine. In response to these actions, the United States, the European Union and other governmental authorities have imposed a series of sanctions and penalties upon Russia and certain of its political and business leaders, and may impose additional sanctions and penalties, which restrict the ability of companies throughout the world to do business with Russia. In addition, a number of companies throughout the world who were not directly restricted by those sanctions have voluntarily elected to cease doing business with companies affiliated with Russia and it is anticipated that Russia will retaliate with its own restrictions and sanctions. It is expected that these events will have an impact upon, among other things, financial markets for the foreseeable future. If the disruptions caused by these events continue for an extended period of time, our ability to search for a business combination or finance such business combination, and the business, operations and financial performance of any target business with which we ultimately consummate a business combination, may be materially adversely affected. The financial statement does not include any adjustments that might result from the outcome of this uncertainty.
Inflation Reduction Act of 2022
On August 16, 2022, the Inflation Reduction Act
of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote, liquidation, or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination. It could also result in the diminution of the amounts available to the holders of Class A common shares upon any redemption.
Liquidity, Capital Resources and Going Concern
The Company’s liquidity needs prior to the
IPO had been satisfied through a payment from the Sponsor of $
Additionally, related parties have paid certain
offering and operating costs as needed. As of September 30, 2022, the Company owed $
In order to finance transaction costs in connection with a Business Combination, the Company’s Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, provide Working Capital Loans to the Company (see Note 5). As of September 30, 2022 and December 31, 2021, there were no amounts outstanding under any Working Capital Loans.
In connection with the Company’s assessment of going concern considerations in accordance with FASB’s Accounting Standards Codification Subtopic 205-40, “Presentation of Financial Statements—Going Concern,” management has determined that if the Company is unable to raise additional funds to alleviate liquidity needs, obtain approval for an extension of the deadline or complete a Business Combination by March 8, 2023, then the Company will cease all operations except for the purpose of liquidating. The Company intends to complete a Business Combination before the mandatory liquidation date or obtain approval for an extension, however, it is uncertain whether the Company will be able to do so. If a Business Combination is not consummated by this date and an extension not requested by the Sponsor, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and the mandatory liquidation, should a Business Combination not occur and an extension is not requested by the Sponsor, and potential subsequent dissolution, raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after March 8, 2023.
7
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the U.S. Securities and Exchanges Commission (“SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected through December 31, 2022.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2021.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act” ), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(l) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of financial statements in conformity with 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 financial statements and the reported amounts of income and expenses during the reporting periods.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these condensed financial statements is the determination of the fair value of the warrant liabilities. 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 had $
8
Marketable Securities Held in Trust Account
At December 31, 2021, the assets held in the Trust Account were substantially held in mutual funds that invest primarily in U.S. government securities and at September 30, 2022, such assets instead were substantially held in U.S. government securities. Marketable Securities held in the Trust Account are classified as trading securities.
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal
Deposit Insurance Corporation coverage limit of $
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Conditionally redeemable Class A common stock (including 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) is classified as temporary equity. At all other times, Class A common stock is classified as stockholders’ equity.
The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ deficit section of the Company’s balance sheets.
Net Income (Loss) per Common Share
Net income (loss) per common stock is computed
by dividing net income (loss) by the weighted average number of shares of common stock outstanding for each of the period. The calculation
of diluted income (loss) per common stock does not consider the effect of the warrants issued in connection with the (i) Initial Public
Offering or (ii) Private Placement Warrants because the exercise of the warrants is contingent upon the occurrence of future events and
the inclusion of such warrants would be anti-dilutive. Such warrants are exercisable to purchase
The Company’s statements of operations include
a presentation of income (loss) per share for Class A Common Stock subject to possible redemption in a manner similar to the two-class
method of income (loss) per common stock. As of September 30, 2022 and 2021, the Company had dilutive securities consisting of
The underwriters had a 45-day option from the
effectiveness date of the IPO (March 3, 2021) to purchase up to an additional
9
Below is a reconciliation of the net income (loss) per common stock:
| Three Months Ended September 30, 2022 | Three Months Ended September 30, 2021 | Nine Months Ended September 30, 2022 | Nine Months Ended September 30, 2021 | |||||||||||||||||||||||||||||
| Class A | Class B | Class A | Class B | Class A | Class B | Class A | Class B | |||||||||||||||||||||||||
| Basic and diluted net income (loss) per common stock | ||||||||||||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||||||||||
| Allocation of net income (loss), as adjusted | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Denominator: | ||||||||||||||||||||||||||||||||
| $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||
Offering Costs associated with the Initial Public Offering
The Company complies with the requirements of
the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A “Expenses of Offering”. Offering costs
consist principally of professional and registration fees incurred through the balance sheet date that are related to the Public Offering.
Offering costs are charged to stockholders’ equity or the Statement of Operations based on the residual method of the Public and
Private Warrants to the proceeds received from the Units sold upon the completion of the IPO. Accordingly offering costs totaling $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature. The fair value of the warrant liabilities are discussed below.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are recorded at fair value on the grant date and re- valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The Company has determined the warrants are a derivative instrument. FASB ASC 470-20, “Debt with Conversion and Other Options” addresses the allocation of proceeds from the issuance of convertible debt into its equity and debt components. The Company applies this guidance to allocate IPO proceeds from the Units between Class A common stock and warrants, using the residual method by allocating IPO proceeds first to fair value of the warrants and then to the Class A common stock.
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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. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
Income Taxes
The Company accounts for income taxes under ASC
740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities for both the expected
impact of differences between the unaudited condensed financial statements and tax basis of assets and liabilities and for the expected
future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be
established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of September 30, 2022
and December 31, 2021, the Company’s deferred tax asset had a full valuation allowance recorded against it. Our effective tax rate
was
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2022 and December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Recently Adopted Accounting Standards
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — “Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2024 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company adopted ASU 2020-06 effective January 1, 2022. The adoption of ASU 2020- 06 does not have an impact on the Company’s financial statements.
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
11
NOTE 3. INITIAL PUBLIC OFFERING
On March 8, 2021, the Company consummated the
IPO of
The underwriters were granted a 45-day option
from the effective date of the IPO (March 3, 2021) to purchase up to an additional
Warrants
Each whole warrant entitles the registered holder
to purchase one whole share of the Company’s Class A common stock at a price of $
Pursuant to the warrant agreement, a warrant holder may exercise its warrants only for a whole number of shares of Class A common stock. This means that only a whole warrant may be exercised at any given time by a warrant holder. No fractional warrants will be issued upon separation of the units and only whole warrants will trade. Accordingly, unless you purchase at least three units, you will not be able to receive or trade a whole warrant. The warrants will expire five years after the completion of the Company’s initial business combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying the Company’s obligations described below with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In no event will the Company be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of Class A common stock underlying such unit.
The Company has agreed that as soon as practicable, but in no event later than thirty (30) days, after the closing of the Company’s initial business combination, the Company will use commercially reasonable efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of Class A common stock issuable upon exercise of the warrants. The Company will use commercially reasonable efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective within 90 days after the closing of the Company’s initial business combination, warrant holders may, under the circumstances specified in the warrant agreement and until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis.
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Once the warrants become exercisable, the Company may call the warrants for redemption:
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and |
| ● | if, and only if, the reported last sale price of the Class A common stock equals or exceeds $ |
If and when the warrants become redeemable by the Company, the Company may exercise the Company’s redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
The Company has established the last of the redemption
criterion discussed above to prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise
price. If the foregoing conditions are satisfied and the Company issues a notice of redemption of the warrants, each warrant holder will
be entitled to exercise his, her or its warrant prior to the scheduled redemption date. However, the price of the Class A common stock
may fall below the $
If the Company calls the warrants for redemption as described above, the Company’s management will have the option to require any holder that wishes to exercise his, her or its warrant to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” the Company’s management will consider, among other factors, the Company’s cash position, the number of warrants that are outstanding and the dilutive effect on the Company’s stockholders of issuing the maximum number of shares of Class A common stock issuable upon the exercise of the Company’s warrants. If the Company’s management takes advantage of this option, all holders of warrants would pay the exercise price by surrendering their warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. If the Company’s management takes advantage of this option, the notice of redemption will contain the information necessary to calculate the number of shares of Class A common stock to be received upon exercise of the warrants, including the “fair market value” in such case. Requiring a cashless exercise in this manner will reduce the number of shares to be issued and thereby lessen the dilutive effect of a warrant redemption. We believe this feature is an attractive option to the Company if the Company does not need the cash from the exercise of the warrants after the Company’s initial business combination. If the Company calls the Company’s warrants for redemption and the Company’s management does not take advantage of this option, the Company’s sponsor and its permitted transferees would still be entitled to exercise their private placement warrants contained in the private placement warrants for cash or on a cashless basis using the same formula described above that other warrant holders would have been required to use had all warrant holders been required to exercise their warrants on a cashless basis, as described in more detail below.
A holder of a warrant may notify the Company in
writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such warrant to the
extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the warrant agent’s
actual knowledge, would beneficially own in excess of
If the number of outstanding shares of Class A common stock is increased by a stock dividend payable in shares of Class A common stock, or by a split- up of shares of Class A common stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of Class A common stock issuable on exercise of each warrant will be increased in proportion to such increase in the outstanding shares of Class A common stock. A rights offering to holders of Class A common stock entitling holders to purchase shares of Class A common stock at a price less than the fair market value will be deemed a stock dividend of a number of shares of Class A common stock equal to the product of (i) the number of shares of Class A common stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for Class A common stock) multiplied by (ii) one (1) minus the quotient of (x) the price per share of Class A common stock paid in such rights offering divided by (y) the fair market value. For these purposes (i) if the rights offering is for securities convertible into or exercisable for Class A common stock, in determining the price payable for Class A common stock, there will be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) fair market value means the volume weighted average price of Class A common stock as reported during the ten (10) trading day period ending on the trading day prior to the first date on which the shares of Class A common stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.
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In addition, if the Company, at any time while the warrants are outstanding
and unexpired, pays a dividend or makes a distribution in cash, securities or other assets to the holders of Class A common stock on
account of such shares of Class A common stock (or other shares of the Company’s capital stock into which the warrants are convertible),
other than (a) as described above, (b) certain ordinary cash dividends of which are dividends up to $
Whenever the number of shares of Class A common stock purchasable upon the exercise of the warrants is adjusted, as described above, the warrant exercise price will be adjusted by multiplying the warrant exercise price immediately prior to such adjustment by a fraction (x) the numerator of which will be the number of shares of Class A common stock purchasable upon the exercise of the warrants immediately prior to such adjustment, and (y) the denominator of which will be the number of shares of Class A common stock so purchasable immediately thereafter.
In addition, if (x) the Company issues additional
shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of the Company’s
initial business combination at an issue price or effective issue price of less than $
In case of any reclassification or reorganization
of the outstanding shares of Class A common stock (other than those described above or any that solely affects the par value of such shares
of Class A common stock), or in the case of any merger or consolidation of the Company with or into another corporation (other than a
consolidation or merger in which the Company is are the continuing corporation and that does not result in any reclassification or reorganization
of the Company’s outstanding shares of Class A common stock), or in the case of any sale or conveyance to another corporation or
entity of the assets or other property of the Company as an entirety or substantially as an entirety in connection with which the Company
is dissolved, the holders of the warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and
conditions specified in the warrants and in lieu of the shares of the Company’s Class A common stock immediately theretofore purchasable
and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property
(including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such
sale or transfer, that the holder of the warrants would have received if such holder had exercised their warrants immediately prior to
such event. However, if such holders were entitled to exercise a right of election as to the kind or amount of securities, cash or other
assets receivable upon such consolidation or merger, then the kind and amount of securities, cash or other assets for which each warrant
will become exercisable will be deemed to be the weighted average of the kind and amount received per share by such holders in such consolidation
or merger that affirmatively make such election, and if a tender, exchange or redemption offer has been made to and accepted by such holders
(other than a tender, exchange or redemption offer made by the company in connection with redemption rights held by stockholders of the
company as provided for in the company’s amended and restated certificate of incorporation or as a result of the repurchase of shares
of Class A common stock by the company if a proposed initial business combination is presented to the stockholders of the company for
approval) under circumstances in which, upon completion of such tender or exchange offer, the maker thereof, together with members of
any group (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) of which such maker is a part, and together with any affiliate
or associate of such maker (within the meaning of Rule 12b-2 under the Exchange Act) and any members of any such group of which any such
affiliate or associate is a part, own beneficially (within the meaning of Rule 13d-3 under the Exchange Act) more than
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The warrants will be issued in registered form
under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and the Company. The warrant agreement
provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any mistake,
including to conform the provisions of the warrant agreement to the description of the terms of the warrants and the warrant agreement
set forth in this prospectus, or to correct any defective provision, but requires the approval by the holders of at least
The warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to the Company, for the number of warrants being exercised. The warrant holders do not have the rights or privileges of holders of Class A common stock and any voting rights until they exercise their warrants and receive shares of Class A common stock. After the issuance of shares of Class A common stock upon exercise of the warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.
Warrants may be exercised only for a whole number of shares of Class A common stock. No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, the Company will, upon exercise, round down to the nearest whole number the number of shares of Class A common stock to be issued to the warrant holder. As a result, warrant holders not purchasing an even number of warrants must sell any odd number of warrants in order to obtain full value from the fractional interest that will not be issued.
The private placement warrants (including the 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 the Company’s initial business combination (except, among other limited exceptions as described under “Principal Stockholders— Transfers of Founder Shares and Private Placement Warrants,” to the Company’s officers and directors and other persons or entities affiliated with the sponsor) and they will not be redeemable by the Company so long as they are held by the sponsor or its permitted transferees. Otherwise, the private placement warrants have terms and provisions that are identical to those of the warrants being sold as part of the units in the IPO. If the private placement warrants are held by holders other than the sponsor or its permitted transferees, the private placement warrants will be redeemable by the Company and exercisable by the holders on the same basis as the warrants included in the units being sold in the IPO.
If holders of the private placement warrants elect to exercise them on a cashless basis, they would pay the exercise price by surrendering his, her or its warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of warrant exercise is sent to the warrant agent. The reason that the Company has agreed that these warrants will be exercisable on a cashless basis so long as they are held by the Company’s sponsor and permitted transferees is because it is not known at this time whether they will be affiliated with the Company following a business combination. If they remain affiliated with the Company, their ability to sell the Company’s securities in the open market will be significantly limited. We expect to have policies in place that prohibit insiders from selling the Company’s securities except during specific periods of time. Even during such periods of time when insiders will be permitted to sell the Company’s securities, an insider cannot trade in the Company’s securities if he or she is in possession of material non-public information. Accordingly, unlike public stockholders who could exercise their warrants and sell the shares of Class A common stock received upon such exercise freely in the open market in order to recoup the cost of such exercise, the insiders could be significantly restricted from selling such securities. As a result, The Company believes that allowing the holders to exercise such warrants on a cashless basis is appropriate.
In order to finance transaction costs in connection
with an intended initial business combination, the Company’s sponsor or an affiliate of the Company’s sponsor or certain of
the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required. If the Company completes
the Company’s initial business combination, the Company would repay such loaned amounts out of the proceeds of the trust account
released to the Company. In the event that the Company’s initial business combination does not close, the Company may use a portion
of the working capital held outside the trust account to repay such loaned amounts but no proceeds from the Company’s trust account
would be used to repay such loaned amounts. Up to $
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NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the IPO, the
Sponsor and the Representatives purchased an aggregate of
NOTE 5. RELATED PARTIES
Founder Shares
On December 31, 2020, the Sponsor purchased
The Company’s initial stockholders have
agreed not to transfer, assign or sell any of their Founder Shares until the earlier of (A) one year after the completion of the Company’s
initial Business Combination, or earlier if, subsequent to the Company’s initial Business Combination, the last sale price of the
Company’s common stock equals or exceeds $
Due to Related Party
The amount due to related parties prior to the
closing of the IPO of $
As of September 30, 2022 and December 31, 2021,
the Company owed approximately $
Working Capital Loans
In order to finance transaction costs in connection
with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may,
but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a
Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company.
Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination
does not close, the Company may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans
but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $
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NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the founder shares and private placement warrants and any warrants that may be issued upon conversion of working capital loans (and any Class A common stock issuable upon the exercise of the private placement warrants and warrants that may be issued upon conversion of working capital loans) will be entitled to registration rights pursuant to a registration and stockholder rights agreement to be signed prior to or on the effective date of the IPO. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities.
In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the Company’s completion of the Company’s initial business combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
On March 8, 2021, the underwriters were paid a
cash underwriting discount of
The Company has entered into agreements with certain
advisors and professionals who will receive payments under contingent fee arrangements upon completion of the transactions contemplated
by the Merger Agreement, estimated to be approximately $
Transaction-Related Fees
In connection with the now-terminated merger agreement
with Syniverse Corporation, the Company entered into agreements with certain professional service advisors in which approximately $
Asserted and Unasserted Claims
On October 15, 2021, Adam Snitkoff, a purported stockholder of the Company, filed a complaint in the Supreme Court of the State of New York (the “Snitkoff Litigation”), naming the Company, Syniverse and the directors of the Company as defendants. The complaint alleged claims for fraudulent and negligent misrepresentation and concealment in connection with allegedly false and misleading statements and omissions in the Company’s proxy statement concerning the proposed Business Combination. The complaint sought, among other things, injunctive relief and compensatory damages.
In addition, the Company received letters from certain purported shareholders or representatives thereof (the “Demand Letters”) demanding that changes be made to the disclosures contained in the Company’s proxy statement, which demands were, in the aggregate, substantially similar to the claims made in the Snitkoff Litigation. No litigation was commenced or threatened with respect to those letters.
The Snitkoff Litigation was terminated pursuant to Notice of Voluntary Discontinuance with Prejudice on February 4, 2022 and the termination of the merger agreement with Syniverse rendered the claims in the Snitkoff Litigation and the Demand Letters moot. In the opinion of the Company, the claims asserted in the Snikoff Litigation and the Demand Letters will not have a material adverse effect on our financial position, results of operations or the cash flow.
Termination of Proposed Transaction
On February 9, 2022, the proposed transaction with Syniverse Corporation was terminated. The Company was able to negotiate a reduction of substantial portion of professional fees incurred in connection with the proposed transaction which are recorded in the accounts of the Company at December 31, 2021.
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NOTE 7. CLASS A COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION
At September 30, 2022 and December 31, 2021, Class A common stock subject to possible redemption is classified as a liability instrument and is measured at fair value. A summary of the activity in the account is summarized as follows:
| Proceeds at issuance date (March 8, 2021) | $ | |||
| Less: | ||||
| Proceeds allocated to public warrants | ( | ) | ||
| Class A common stock issuance cost | ( | ) | ||
| Fair value overallotment option | ( | ) | ||
| Add: | ||||
| Remeasurement of the carrying value to redemption value | ||||
| Class A common shares subject to redemption, December 31, 2021 | ||||
| Add: | ||||
| Remeasurement of the carrying value to redemption value | ||||
| Class A common shares subject to redemption, September 30, 2022 | $ |
NOTE 8. STOCKHOLDERS’ DEFICIT
Preferred Stock — The Company
is authorized to issue a total of
Class A common stock — The
Company is authorized to issue a total of
Class B common stock — The
Company is authorized to issue a total of
The Company’s initial stockholders have
agreed not to transfer, assign or sell any of their Founder Shares until the earlier of (A) one year after the completion of the Company’s
initial Business Combination, or earlier if, subsequent to the Company’s initial Business Combination, the last sale price of the
Company’s common stock equals or exceeds $
The shares of Class B common stock will automatically
convert into shares of Class A common stock at the time of our 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 sold in the IPO and related to the closing of the 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,
With respect to any other matter submitted to a vote of our stockholders, including any vote in connection with our initial business combination, except as required by law, holders of our founder shares and holders of our public shares will vote together as a single class, with each share entitling the holder to one vote.
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NOTE 9. RECURRING FAIR VALUE MEASUREMENTS
Investment Held in Trust Account
As of September 30, 2022, investment securities
in the Company’s Trust Account consisted of U.S. government securities in the amount of $
Warrant Liability
At September 30, 2022 and December 31, 2021, there
were
Overallotment Option
Upon completion the IPO, the underwriters held
an overallotment option which expired 45 days later. The overallotment option represents a financials instrument which was recognized
at fair value as a liability instrument at inception. The principal assumptions going into the fair value computation were as follows:
Term –
Recurring Fair Value Measurements
The Company’s investments consist of U.S. government securities or mutual funds that invest primarily in U.S. government securities. Fair values of these investments are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assets. The Company’s warrant liability (including Public Warrants prior to trading separately on April 26, 2021) is based on a valuation model utilizing management judgment and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in a material change in fair value. The fair value of the private warrant liability is classified within Level 3 of the fair value hierarchy. The Public Warrants were transferred to Level 1 for the period ending December 31, 2021.
The following table presents fair value information as of September 30, 2022 of the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
| Carrying Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| Investments held in Trust Account - U.S. Treasury Securities | ||||||||||||||||
| U.S. Treasury Securities | $ | $ | ||||||||||||||
| Liabilities: | ||||||||||||||||
| Private Placement Warrants | ||||||||||||||||
| Public Warrants | ||||||||||||||||
The following table presents fair value information as of December 31, 2021 of the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
| Carrying Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| Investments held in Trust Account - U.S. Treasury Securities | ||||||||||||||||
| Market Fund | $ | $ | ||||||||||||||
| Liabilities: | ||||||||||||||||
| Private Placement Warrants | ||||||||||||||||
| Public Warrants | ||||||||||||||||
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Measurement
The Company established the initial fair value
for the Warrants as of March 8, 2021, which was the date of the consummation of the Company’s IPO, and on September 30, 2022. On
December 31, 2021 the fair value was remeasured. For the initial periods, neither the Public Warrants nor the Private Warrants were separately
traded on an open market, but the Public Warrants did commence separate trading as of April 26, 2021. As such, the Company used a Monte
Carlo simulation model to value the Warrants for the initial periods and valued the Public Warrants based upon market values for the December
31,2021 remeasurement. The Company allocated the proceeds received from (i) the sale of Units (which is inclusive of one share of Class
A common stock and one-third of one Public Warrant), (ii) the sale of Private Warrants, and (iii) the issuance of Class B common stock,
first to the Warrants based on their fair values as determined at initial measurement, with the remaining proceeds allocated to Class
A common stock subject to possible redemption (temporary equity), Class A common stock (permanent equity) and Class B common stock (permanent
equity) based on their relative fair values at the initial measurement date. The Warrants were classified within Level 3 of the fair value
hierarchy at the initial measurement dates due to the use of unobservable inputs. The aggregate fair value of the Public Warrants, which
amounted to $
| December 31, 2021 | September 30, 2022 | |||||||
| Risk-fee interest rate | | % | | % | ||||
| Expected term (years) | ||||||||
| Expected volatility | % | % | ||||||
| Exercise price | $ | $ | ||||||
| Probability of completing a business combination | % | % | ||||||
| Dividend yield | ||||||||
The change in the fair value of the level 3 warrant liabilities for the three and nine months ended September 30, 2022 is summarized as follows:
| Private Warrants | ||||
| Fair value at January 1, 2022 | $ | |||
| Change in fair value | ( | ) | ||
| Fair Value at March 31, 2022 | ||||
| Change in fair value | ( | ) | ||
| Fair Value at June 30, 2022 | ||||
| Change in fair value | ( | ) | ||
| Fair Value at September 30, 2022 | $ | |||
The change in the fair value of the level 3 warrant liabilities for the three and nine months ended September 30, 2021 is summarized as follows:
| Public Warrants | Private Warrants | Total Warrants | ||||||||||
| Fair value at March 8, 2021 (Initial measurement) | $ | $ | $ | |||||||||
| Change in fair value | ( | ) | ( | ) | ( | ) | ||||||
| Fair Value at March 31, 2021 | $ | $ | $ | |||||||||
| Change in fair value | ( | ) | ( | ) | ||||||||
| Transfer to Level 2 | ( | ) | — | ( | ) | |||||||
| Fair Value at June 30, 2021 | $ | — | $ | $ | ||||||||
| Change in fair value | — | |||||||||||
| Fair Value at September 30, 2021 | $ | — | $ | $ | ||||||||
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated events and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Based upon this review, other than outlined below, the Company did not identify any events that would have required adjustment to or disclosure in the condensed financial statements.
On October 31, 2022, the Company filed with the Securities and Exchange Commission an initial draft of its Notice of Special Meeting to propose and seek stockholders’ approval to amend the Company’s Amended and Restated Certificate of Incorporation (“Charter”) to extend the date by which the Company must consummate a business combination from March 8, 2023 to March 8, 2024 and to amend the Charter to permit the release of interest from the Trust Account to the extent that such interest is accrued after the date of Interest Amendments to pay the Company’s working capital expenses.
In connection with the consummation of the transactions contemplated by the extension and working capital amendment proposal, public stockholders may elect to redeem all of their public shares for a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account as of two business days prior to such approval, including interest not previously released to the Company to pay taxes, divided by the number of then-outstanding public shares.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to M3-Brigade Acquisition II Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.
Overview
We are a blank check company formed under the laws of the State of Delaware on December 16, 2020 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar Business Combination with one or more businesses. We intend to effectuate our Business Combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our capital stock, debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from December 16, 2020 (inception) through September 30, 2022 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and the search for a target company for a Business Combination, including activities relating to the terminated merger agreement with Syniverse Corporation. We do not expect to generate any operating revenues until after the completion of our Business Combination. We expect to generate non-operating income in the form of interest income on marketable securities held after the Initial Public Offering. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended September 30, 2022, we had a net income of $2,121,946, which consists of change in fair value of warrant liabilities of $739,327 and unrealized gain on investments of $1,904,877, offset by formation and operating costs of $ $259,391 and provision for income taxes of $262,867.
For the nine months ended September 30, 2022, we had a net income of $31,040,168, which consists of which consists of change in fair value of warrant liabilities of $25,265,655, unrealized gain on investments of $2,023,937 and costs waived for the terminated business combination of $5,400,000, offset by formation and operating costs of $1,386,557 and provision for income taxes of $262,867.
For the three months ended September 30, 2021, we incurred a loss from operations of $3,234,511, including professional fees of $300,211 insurance expenses of $154,300 and merger related expenses totaled $2,780,000. In addition to the loss from operations, we recorded a loss on the fair value of the warrants of $3,541,131 and interest income of $5,147.
For the nine months ended September 30, 2021, we incurred a loss from operations of $4,961,385 including professional fees of $390,169, insurance expenses of $291,216 and merger related expenses totaled $4,280,000. In addition to the income from operations, we incurred other net expenses of $83,157 consisting of Public Offering costs of $1,265,712, excess fair value of the warrants sold in the private placement of $529,653, offset by a gain on the change in the fair value of the warrants of $279,446, gain on the change in the fair value of the overallotment option of $1,406,950 and interest income of $25,812.
Through September 30, 2022, our efforts have been limited to organizational activities, activities relating to identifying and evaluating prospective acquisition candidates (including activities relating to the terminated merger agreement with Syniverse Corporation) and activities relating to general corporate matters. We have not generated any revenues from operations, other than interest income on the proceeds held in the Trust Account. As of September 30, 2022 and December 31, 2021, $402,058,201 and $400,034,264 was held in the Trust Account, respectively. We had cash outside of trust of $211,124 and $987,254 at September 30, 2022 and December 31, 2021, respectively and we had $1,480,047 and $6,325,424 of accounts payable and accrued expenses as of September 30, 2022 and December 31, 2021. Approximately $400,000 and $5,917,029, respectively, of such liabilities at September 30, 2022 and December 31, 2021 relate to the terminated business combination, of which $5,400,000 of the December 31, 2021 balance was waived by the vendor in February 2022.
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Except for the withdrawal of interest to pay our taxes and up to $100,000 to pay dissolution expenses, if any, our amended and restated certificate of incorporation (the “Charter”) provides that none of the funds held in trust will be released from the Trust Account until the earliest of (i) the completion of an initial business combination; (ii) the redemption of any of the shares of Class A common stock included in the units sold in the Public Offering (the “Units”) properly submitted in connection with a stockholder vote to amend the Charter to modify the substance or timing of the Company’s obligation to redeem 100% of the common stock included in the Units being sold in the Public Offering if the Company does not complete an initial business combination within 18 months from the closing of the Public Offering or with respect to any other material provisions relating to stockholders’ rights or pre-initial business combination activity or (iii) the redemption of 100% of the shares of Class A common stock included in the Units sold in the Public Offering if we are unable to complete a business combination within such 18 month period. Through September 30, 2022, we have not withdrawn any funds from interest earned on the trust proceeds. Other than the deferred underwriting discounts and commissions, no amounts are payable to the underwriters of the Public Offering in the event of a business combination.
Liquidity and Capital Resources
On March 8, 2021, we consummated the Initial Public Offering of 40,000,000 Units at a price of $10.00 per Unit, generating gross proceeds of $400,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 7,500,000 Private Placement Warrants at a price of $1.50 per Private Placement Warrant in a private placement to our Sponsor, generating gross proceeds of $11,250,000. On April 19, 2021, the overallotment option provided to our underwriter expired without being exercised.
Following the Initial Public Offering, a total of $400,000,000 was placed in the Trust Account and we had $1,530,000 of cash held outside of the Trust Account, after payment of costs related to the Initial Public Offering, and available for working capital purposes. We incurred $22,706,154 in transaction costs, including $8,000,000 of underwriting fees, $14,000,000 of deferred underwriting fees and $706,154 of other offering costs.
For the nine months ended September 30, 2022, cash used in operating activities was $776,130. Net income of $31,040,168 was primarily comprised of change in fair value of warrant liability of $25,265,655, unrealized gain on marketable securities held in Trust Account of $2,023,937 and accrued terminated merger transaction costs waived of $5,400,000. Changes in operating assets and liabilities provided $873,294 of cash for operating activities.
For the nine months ended September 30, 2021, cash used in operating activities was $1,514,806. Net loss of $5,044,542 was primarily comprised of Public Offering costs of $1,265,712 and a non-cash charge to earnings related to the excess fair value of our warrants of $529,653, offset by a non-cash gain in earnings of $279,446 related to the change in fair value of our warrants a non-cash gain of $1,406,950 related to the change in the fair value of the overallotment option and interest income $25,812 from our trust account. Further, the change in prepaid insurance and accounts payable and accrued expenses used net cash of $3,446,579.
In February 2022, a vendor waived payment of $5,400,000 of the accrued transaction costs. This reversal is included in the condensed statement of operations.
As of September 30, 2022, we had cash and marketable securities held in the Trust Account of approximately $402,058,201. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account to complete our Business Combination. We may withdraw interest to pay franchise and income taxes. During the three and nine months ended September 30, 2022, we did not withdraw any interest earned on the Trust Account. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
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As of September 30, 2022, we had cash of $211,124 outside of the Trust Account. The Company believes it is likely that it will be required to obtain additional funding in order to continue its operations for the next 12 months. If a business combination transaction does not occur, management believes that a substantial portion of such fees will not be required to be paid or will be substantially reduced.
Additionally, related parties have paid certain offering and operating costs as needed. As of September 30, 2022, the Company owed $40,000 to the related parties on account of unreimbursed expenses incurred in connection with the sourcing of its initial Business Combination and the transactions contemplated by the Merger Agreement.
We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate, and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor, or our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.50 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period. The terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. The loans would be repaid upon consummation of a Business Combination, without interest.
Further, our sponsor, officers and directors or their respective affiliates may, but are not obligated to, loan us funds as may be required (the “Working Capital Loans”). If we complete a business combination, we would repay the Working Capital Loans. 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. Such Working Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of a business combination, without interest, or, at the lender’s discretion, converted upon consummation of a business combination into additional Private Warrants at a price of $1.50 per Private Warrant. As of September 30, 2022 and December 31, 2021, no Working Capital Loans have been issued.
Going Concern
In connection with the Company’s assessment of going concern considerations in accordance with FASB’s Accounting Standards Codification Subtopic 205-40, “Presentation of Financial Statements—Going Concern,” management has determined that if the Company is unable to raise additional funds to alleviate liquidity needs, obtain approval for an extension of the deadline or complete a Business Combination by March 8, 2023, then the Company will cease all operations except for the purpose of liquidating. The Company intends to complete a Business Combination before the mandatory liquidation date or obtain approval for an extension, however, it is uncertain whether the Company will be able to do so. If a Business Combination is not consummated by this date and an extension not requested by the Sponsor, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and the mandatory liquidation, should a Business Combination not occur and an extension is not requested by the Sponsor, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after March 8, 2023.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2022. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
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Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.
The underwriters are entitled to a deferred fee of $0.45 per Unit issued at our initial public offering, or $14,000,000 in the aggregate. The deferred fee will be waived by the underwriters in the event that we do not complete a Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Class A Common Stock Subject to Possible Redemption
We account for our shares of Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including 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) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, the Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ deficit section of our balance sheets.
Net Income (Loss) per Common Share
Our Company’s statement of operations includes a presentation of income (loss) per share for common shares subject to possible redemption in a manner similar to the two-class method of income (loss) per share. Net income (loss) per common share, basic and diluted, for Common stock subject to possible redemption is calculated by dividing the proportionate share of income or loss on marketable securities held by the Trust Account, net of applicable franchise and income taxes, by the weighted average number of Common stock subject to possible redemption outstanding since original issuance.
Net income (loss) per share, basic and diluted, for non-redeemable common stock is calculated by dividing the net income (loss), adjusted for income or loss on marketable securities attributable to Common stock subject to possible redemption, by the weighted average number of non-redeemable common stock outstanding for the period.
Non-redeemable common stock includes Founder Shares and non-redeemable shares of common stock as these shares do not have any redemption features. Non-redeemable common stock participates in the income or loss on marketable securities based on non-redeemable shares’ proportionate interest.
Warrant Liabilities
The Company’s Warrants meet the definition of a derivative and are recorded as derivative liabilities on the Balance Sheet and measured at fair value. At each reporting date, changes in the fair value are recognized in the statement of operations in the period of change.
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Recently Adopted Accounting Standards
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — “Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2024 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. We have adopted ASU 2020-06 effective January 1, 2022. The adoption of ASU 2020- 06 does not have an impact on our financial statements.
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of September 30, 2022, we were not subject to any significant market or interest rate risk.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2022. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective, due to the material weakness in our internal control over financial reporting related to the Company’s accounting for complex financial instruments. Similarly, in carrying out such evaluation, our Chief Executive Officer and Chief Financial Officer also concluded that such disclosure controls and procedures were not effective, due to the material weakness in our internal control over financial reporting related to the Company’s accounting for accounts payable and accrued expenses, including properly evaluating contractual arrangements and differentiating them as contractual liabilities or accounting contingencies. As a result, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with GAAP. Accordingly, management believes that the financial statements included in this Quarterly Report present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Management’s Report on Internal Controls Over Financial Reporting
This quarterly report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
There is no material litigation, arbitration or governmental proceeding currently pending against the Company or any members of its management team in their capacities as such. The Company had been party to a legal proceeding captioned Adam Snitkoff v. Mohsin Meghji, et al. which was filed in the Supreme Court of the State of New York located in Nassau County in October 2021 in connection with certain claims relating to the proposed business combination with Syniverse. That proceeding was terminated pursuant to Notice of Voluntary Discontinuance with Prejudice on February 4, 2022. The Company and the members of its management team have not been subject to any other such proceeding in the 12 months preceding the date hereof.
Item 1A. Risk Factors.
Factors that could cause the Company’s actual business, financial condition and/or results of operations to differ materially from those in this Quarterly Report are any of the risks factors described in the Registration Statement and in the Company’s Annual Report on Form 10-K for the period ended December 31, 2021. As of the date of this Quarterly Report, there have been no material changes with respect to those risk factors previously disclosed in our Registration Statement or such Annual Report filed with the SEC. Any of these risk factors could result in a significant or material adverse effect on the Company’s business, financial condition and/or results of operations. Additional risk factors not presently known to the Company or that the Company currently deems immaterial may also impair the Company’s business, financial condition and/or results of operations.
In addition, we may be subject to the following risk in connection with changes in laws and regulations. Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our initial business combination and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments. In particular, we will be required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete our initial business combination and results of operations.
On March 30, 2022, the SEC issued proposed rules relating to, among other items, disclosures in business combination transactions involving special purpose acquisition companies (“SPACs”) and private operating companies; the financial statement requirements applicable to transactions involving shell companies; the use of projections in SEC filings in connection with proposed business combination transactions; the potential liability of certain participants in proposed business combination transactions; and the extent to which SPACs could become subject to regulation under the Investment Company Act of 1940, as amended, including a proposed rule that would provide SPACs a safe harbor from treatment as an investment company if they satisfy certain conditions that limit a SPAC’s duration, asset composition, business purpose and activities. These rules, if adopted, whether in the form proposed or in a revised form, may increase the costs of and the time needed to negotiate and complete an initial business combination, and may constrain the circumstances under which we could complete an initial business combination.
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak on the Company’s financial position will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s financial position may be materially adversely affected. Additionally, the Company’s ability to complete an initial Business Combination may be materially adversely affected due to significant governmental measures that may be implemented to contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit the Company’s ability to have meetings with potential targets or investors, or affect the ability of a potential target company’s personnel, vendors and service providers to negotiate and consummate an initial Business Combination in a timely manner. The Company’s ability to consummate an initial Business Combination may also be dependent on the ability to raise additional equity and debt financing, which may be impacted by the COVID-19 outbreak and the resulting direct and indirect impacts thereof upon the financial markets. The financial statement does not include any adjustments that might result from the outcome of this uncertainty.
In February 2022, the Russian Federation launched a military campaign against Ukraine. In response to these actions, the United States, the European Union and other governmental authorities have imposed a series of sanctions and penalties upon Russia and certain of its political and business leaders, and may impose additional sanctions and penalties, which restrict the ability of companies throughout the world to do business with Russia. In addition, a number of companies throughout the world who were not directly restricted by those sanctions have voluntarily elected to cease doing business with companies affiliated with Russia and it is anticipated that Russia will retaliate with its own restrictions and sanctions. It is expected that these events will have an impact upon, among other things, financial markets for the foreseeable future. If the disruptions caused by these events continue for an extended period of time, our ability to search for a business combination or finance such business combination, and the business, operations and financial performance of any target business with which we ultimately consummate a business combination, may be materially adversely affected. The financial statement does not include any adjustments that might result from the outcome of this uncertainty.
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Inflation Reduction Act of 2022
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote, liquidation, or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination. It could also result in the diminution of the amounts available to the holders of Class A common shares upon any redemption.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On March 8, 2021, we consummated our Initial Public Offering of 40,000,000 Units. The Units were sold at an offering price of $10.00 per Unit, generating total gross proceeds of $400,000,000. Each Unit consisted of one share of Class A common stock of the Company, par value $.0001 per share, and one-third of one redeemable warrant of the Company. Continental Stock Transfer & Trust Company acted as the sole book-running manager of the offering. The securities sold in the offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333-253132). The SEC declared the registration statement effective on March 3, 2021.
Simultaneously with the consummation of the Initial Public Offering, we consummated a private placement of 7,500,000 Private Placement Warrants to our Sponsor at a price of $1.50 per Private Placement Warrant, generating total proceeds of $11,250,000. Such securities were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The Private Placement Warrants are the same as the warrants underlying the Units sold in the Initial Public Offering, except that Private Placement Warrants are not transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants are exercisable on a cashless basis and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees.
Of the gross proceeds received from the Initial Public Offering and the Private Placement Warrants, $400,000,000 was placed in the Trust Account.
We paid a total of $8,000,000 underwriting discounts and commissions and $690,704 for other costs and expenses related to the Initial Public Offering. In addition, the underwriters agreed to defer $14,000,000 in underwriting discounts and commissions.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Quarterly Report.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
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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, as amended, 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, except as shall be expressly set forth by specific reference in such filing. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| M3-BRIGADE ACQUISITION II CORP. | |||
| Date: November 14, 2022 | By: | /s/ Mohsin Y. Meghji | |
| Name: | Mohsin Y. Meghji | ||
| Title: | Executive Chairman | ||
| Date: November 14, 2022 | By: | /s/ Brian Griffith | |
| Name: | Brian Griffith | ||
| Title: | Chief Financial Officer | ||
29
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Mohsin Y. Meghji, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of M3-Brigade Acquisition II Corp.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and |
| b) | (Paragraph omitted pursuant to Exchange Act Rules 13a-14(a) and 15d-15(a); |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 14, 2022
| /s/ Mohsin Y. Meghji | |
| Mohsin Y. Meghji | |
| Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Brian Griffith, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of M3-Brigade Acquisition II Corp.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and |
| b) | (Paragraph omitted pursuant to Exchange Act Rules 13a-14(a) and 15d-15(a); |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 14, 2022
| /s/ Brian Griffith | |
| Brian Griffith | |
| Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of M3-Brigade Acquisition II Corp. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2022, as filed with the Securities and Exchange Commission (the “Report”), I, Mohsin Y. Meghji, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: November 14, 2022
| /s/ Mohsin Y. Meghji | |
| Mohsin Y. Meghji | |
| Chief Executive Officer |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of M3-Brigade Acquisition II Corp. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2022, as filed with the Securities and Exchange Commission (the “Report”), I, Brian Griffith, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: November 14, 2022
| /s/ Brian Griffith | |
| Brian Griffith | |
| Chief Financial Officer |
Condensed Balance Sheets (Parentheticals) - $ / shares |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Common Stock subject to possible redemption | 40,000,000 | 40,000,000 |
| Preferred shares, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
| Preferred shares, shares authorized | 1,000,000 | 1,000,000 |
| Preferred shares, shares issued | ||
| Preferred shares, shares outstanding | ||
| Class B Common Shares | ||
| Common shares, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
| Common shares, shares authorized | 50,000,000 | 50,000,000 |
| Common shares, shares issued | 10,000,000 | 10,000,000 |
| Common shares, shares outstanding | 10,000,000 | 10,000,000 |
Condensed Statements of Operations (Unaudited) (Parentheticals) - $ / shares |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Redeemable Class A Common Stock | ||||
| Basic and diluted weighted average shares outstanding | 40,000,000 | 40,000,000 | 40,000,000 | 25,193,370 |
| Basic and diluted net income per share | $ 0.09 | $ 0.04 | $ 0.58 | $ 0.05 |
| Non Redeemable Common Stock | ||||
| Basic and diluted weighted average shares outstanding | 10,000,000 | 10,000,000 | 10,000,000 | 10,000,000 |
| Basic and diluted net income per share | $ 0.04 | $ (0.14) | $ 0.62 | $ (0.13) |
Condensed Statements of Changes in Stockholders' Deficit (Unaudited) - USD ($) |
Class A
Common Shares Subject to Possible Redemption
|
Class B
Common Shares
|
Additional Paid-in Capital |
Accumulated Deficit |
Total |
|---|---|---|---|---|---|
| Balance at Dec. 31, 2020 | $ 1,150 | $ 23,850 | $ 25,000 | ||
| Balance (in Shares) at Dec. 31, 2020 | 11,500,000 | ||||
| Sale of 40,000,000 Units on March 8, 2021, net of warrant fair value | $ 400,000,000 | ||||
| Sale of 40,000,000 Units on March 8, 2021, net of warrant fair value (in Shares) | 40,000,000 | ||||
| Offering costs | $ (21,440,443) | ||||
| Fair value Public warrants at inception | (20,553,964) | ||||
| Fair value of overallotment option at inception | (1,406,950) | ||||
| Remeasurement to shares subject to possible redemption | 43,401,357 | (23,850) | (43,377,507) | (43,401,357) | |
| Net income (loss) | (266,795) | (266,795) | |||
| Balance at Mar. 31, 2021 | $ 400,000,000 | $ 1,150 | (43,644,302) | (43,643,152) | |
| Balance (in Shares) at Mar. 31, 2021 | 40,000,000 | 11,500,000 | |||
| Forfeiture of Class B Shares | $ (150) | 150 | |||
| Forfeiture of Class B Shares (in Shares) | (1,500,000) | ||||
| Net income (loss) | 1,992,748 | 1,992,748 | |||
| Balance at Jun. 30, 2021 | $ 400,000,000 | $ 1,000 | (41,651,404) | (41,650,404) | |
| Balance (in Shares) at Jun. 30, 2021 | 40,000,000 | 10,000,000 | |||
| Net income (loss) | (6,770,495) | (6,770,495) | |||
| Balance at Sep. 30, 2021 | $ 400,000,000 | $ 1,000 | (48,421,899) | (48,420,899) | |
| Balance (in Shares) at Sep. 30, 2021 | 40,000,000 | 10,000,000 | |||
| Balance at Dec. 31, 2021 | $ 400,000,000 | $ 1,000 | (45,369,463) | (45,368,463) | |
| Balance (in Shares) at Dec. 31, 2021 | 40,000,000 | 10,000,000 | |||
| Net income (loss) | 24,170,969 | 24,170,969 | |||
| Balance at Mar. 31, 2022 | $ 400,000,000 | $ 1,000 | (21,198,494) | (21,197,494) | |
| Balance (in Shares) at Mar. 31, 2022 | 40,000,000 | 10,000,000 | |||
| Balance at Dec. 31, 2021 | $ 400,000,000 | $ 1,000 | (45,369,463) | (45,368,463) | |
| Balance (in Shares) at Dec. 31, 2021 | 40,000,000 | 10,000,000 | |||
| Remeasurement to shares subject to possible redemption | (1,421,296) | ||||
| Balance at Sep. 30, 2022 | $ 401,421,296 | $ 1,000 | (15,750,591) | (15,749,591) | |
| Balance (in Shares) at Sep. 30, 2022 | 40,000,000 | 10,000,000 | |||
| Balance at Mar. 31, 2022 | $ 400,000,000 | $ 1,000 | (21,198,494) | (21,197,494) | |
| Balance (in Shares) at Mar. 31, 2022 | 40,000,000 | 10,000,000 | |||
| Net income (loss) | 4,747,253 | 4,747,253 | |||
| Balance at Jun. 30, 2022 | $ 400,000,000 | $ 1,000 | (16,451,241) | (16,450,241) | |
| Balance (in Shares) at Jun. 30, 2022 | 40,000,000 | 10,000,000 | |||
| Remeasurement to shares subject to possible redemption | $ 1,421,296 | (1,421,296) | (1,421,296) | ||
| Net income (loss) | 2,121,946 | 2,121,946 | |||
| Balance at Sep. 30, 2022 | $ 401,421,296 | $ 1,000 | $ (15,750,591) | $ (15,749,591) | |
| Balance (in Shares) at Sep. 30, 2022 | 40,000,000 | 10,000,000 |
Condensed Statements of Changes in Stockholders' Deficit (Unaudited) (Parentheticals) |
3 Months Ended |
|---|---|
|
Mar. 31, 2021
shares
| |
| Statement of Stockholders' Equity [Abstract] | |
| Sale of Units | 40,000,000 |
Description of Organization and Business Operations and Going Concern |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Description of Organization and Business Operations and Going Concern [Abstract] | |
| DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS AND GOING CONCERN | NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS AND GOING CONCERN
M3-Brigade Acquisition II Corp. (the “Company”) is a newly organized blank check company incorporated as a Delaware corporation on December 16, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (“Business Combination”). On August 16, 2021, the Company entered into an Agreement and Plan of Merger with Syniverse Corporation. On February 9, 2022, the proposed transaction with Syniverse Corporation was terminated. The Company incurred $6,372,703 of costs in connection with the terminated merger transaction through December 31, 2021, of which $5,917,029 was unpaid at December 31, 2021. In February 2022, the Company was notified that accrued merger transaction costs of $5,400,000 had been waived by a vendor. The Company derecognized this liability during the quarter ended March 31, 2022.
The Company has selected December 31 as its fiscal year end.
As of September 30, 2022, the Company had not commenced any operations. All activity for the period from December 16, 2020 (inception) through September 30, 2022 relates to the Company’s formation and its initial public offering (“IPO”), which is described below, and its activities relating to the sourcing of an initial Business Combination. The Company believes it will not generate any operating revenue until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the IPO and unrealized gains and losses on the change in fair value of its warrants.
The Company’s sponsor is M3-Brigade Sponsor II LP, a Delaware limited liability company (the “Sponsor”).
The registration statement for the Company’s IPO was declared effective on March 3, 2021 (the “Effective Date”). On March 8, 2021, the Company consummated the IPO of 40,000,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $400,000,000, which is discussed in Note 3 and Note 8.
The underwriters had a 45-day option from the effectiveness date of the IPO (March 3, 2021) to purchase up to an additional 6,000,000 units to cover over-allotments, if any. On April 17, 2021 the underwriters’ over-allotment option expired unexercised (see Note 6).
Simultaneously with the closing of the IPO, the Company consummated the sale of 7,500,000 Private Placement Warrants (the “Private Warrants”) to the Sponsor at a price of $1.50 per Private Warrant, generating total gross proceeds of $11,250,000.
Transaction costs of the IPO amounted to $22,706,155 consisting of $8,000,000 of underwriting discount, $14,000,000 of deferred underwriting discount, and $706,155 of other offering costs. Of the offering costs, $1,265,712 is included in transaction costs on the Statement of Operations and $21,440,443 is included in equity.
Following the closing of the IPO on March 8, 2021, $400,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Private Warrants was placed in a Trust Account and may be invested only in 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 in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act of 1940, as amended (the “Investment Company Act”), as determined by the Company. Except with respect to interest earned on the funds held in the trust account that may be released to the Company to pay its tax obligations and up to $100,000 of interest to pay dissolution expenses, the proceeds from the IPO and the sale of the Private Warrants will not be released from the trust account until the earlier of (i) the completion of the Company’s initial business combination and (ii) the redemption of 100% of the Company’s public shares if the Company is unable to complete the Company’s initial business combination within 24 months from the closing of the IPO (March 8, 2023). The proceeds deposited in the trust account could become subject to the claims of our creditors, if any, which could have priority over the claims of our public stockholders.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO, although substantially all of the net proceeds of the IPO are intended to be generally applied toward consummating a Business Combination with (or acquisition of) a Target Business. As used herein, “Target Business” must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the trust account (less any deferred underwriting commissions and taxes payable on interest earned) at the time of our signing a definitive agreement in connection with the Company’s initial business combination. Furthermore, there is no assurance that the Company will be able to successfully consummate a Business Combination.
The Company, after signing a definitive agreement for a Business Combination, will either (i) seek stockholder approval of the Business Combination at a meeting called for such purpose in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or against the Business Combination, for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest but less taxes payable, or (ii) provide stockholders with the opportunity to sell their shares to the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to commencement of the tender offer, including interest but less taxes payable. The decision as to whether the Company will seek stockholder approval of the Business Combination or will allow stockholders to sell their shares in a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require the Company to seek stockholder approval unless a vote is required by stock exchange rules. If the Company seeks stockholder approval, it will complete its Business Combination only if a majority of the outstanding shares of common stock voted are voted in favor of the Business Combination. However, in no event will the Company redeem its public shares in an amount that would cause its net tangible assets to be less than $5,000,001. In such case, the Company would not proceed with the redemption of its public shares and the related Business Combination, and instead may search for an alternate Business Combination.
If the Company holds a stockholder vote or there is a tender offer for shares in connection with a Business Combination, a public stockholder will have the right to redeem its shares for an amount in cash equal to its pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest but less taxes payable. As a result, such shares of common stock will be recorded at redemption amount and classified as temporary equity prior to the consummation of such initial Business Combination, in accordance with FASB ASC 480, “Distinguishing Liabilities from Equity.”
The Company will only have 24 months from the closing date of the IPO (March 8, 2023) to complete its initial Business Combination. If the Company does not complete a Business Combination within this period of time, it shall (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 of common stock for a per share pro rata portion of the Trust Account, including interest, but less taxes payable (less up to $100,000 of such net interest to pay dissolution expenses) and (iii) as promptly as possible following such redemption, dissolve and liquidate the balance of the Company’s net assets to its remaining stockholders, as part of its plan of dissolution and liquidation.
The initial stockholders have entered into letter agreements with the Company, pursuant to which they have waived their rights to participate in any redemption with respect to their initial shares; however, if the initial stockholders or any of the Company’s officers, directors or affiliates acquire shares of Class A common stock in or after the IPO, they will be entitled to a pro rata share of the Trust Account with respect to such acquired shares of Class A common stock upon the Company’s redemption or liquidation in the event the Company does not complete a Business Combination within the required time period.
In the event of such redemption, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per Unit in the IPO.
The Company’s Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below (i) $10.00 per public share or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes and working capital, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the trust account and except as to any claims under our indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Company’s Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company has not independently verified whether the Company’s Sponsor has sufficient funds to satisfy its indemnity obligations and the Company’s Sponsor may not be able to satisfy those obligations. The Company has not asked the Company’s Sponsor to reserve for such eventuality. The Company believes the likelihood of the Company’s Sponsor having to indemnify the trust account is limited because the Company will endeavor to have all vendors and prospective target businesses as well as other entities execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the trust account.
Risks and Uncertainties
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak on the Company’s financial position will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s financial position may be materially adversely affected. Additionally, the Company’s ability to complete an initial Business Combination may be materially adversely affected due to significant governmental measures that may be implemented to contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit the Company’s ability to have meetings with potential targets or investors, or affect the ability of a potential target company’s personnel, vendors and service providers to negotiate and consummate an initial Business Combination in a timely manner. The Company’s ability to consummate an initial Business Combination may also be dependent on the ability to raise additional equity and debt financing, which may be impacted by the COVID-19 outbreak and the resulting direct and indirect impacts thereof upon the financial markets. The financial statement does not include any adjustments that might result from the outcome of this uncertainty.
In February 2022, the Russian Federation launched a military campaign against Ukraine. In response to these actions, the United States, the European Union and other governmental authorities have imposed a series of sanctions and penalties upon Russia and certain of its political and business leaders, and may impose additional sanctions and penalties, which restrict the ability of companies throughout the world to do business with Russia. In addition, a number of companies throughout the world who were not directly restricted by those sanctions have voluntarily elected to cease doing business with companies affiliated with Russia and it is anticipated that Russia will retaliate with its own restrictions and sanctions. It is expected that these events will have an impact upon, among other things, financial markets for the foreseeable future. If the disruptions caused by these events continue for an extended period of time, our ability to search for a business combination or finance such business combination, and the business, operations and financial performance of any target business with which we ultimately consummate a business combination, may be materially adversely affected. The financial statement does not include any adjustments that might result from the outcome of this uncertainty.
Inflation Reduction Act of 2022
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote, liquidation, or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination. It could also result in the diminution of the amounts available to the holders of Class A common shares upon any redemption.
Liquidity, Capital Resources and Going Concern
The Company’s liquidity needs prior to the IPO had been satisfied through a payment from the Sponsor of $25,000 for the Founder Shares (see Note 5). Approximately $3.2 million of the proceeds from the sale of the private placement warrants, net of direct expenses, was deposited into an operating bank account to fund the cost of operations. As of September 30, 2022, the Company had approximately $211,124 in its operating bank account and had a working capital deficit of approximately $369,624 excluding the deferred underwriting commission and warrant liability. The deferred underwriting commissions of $14 million are payable upon the closing of a business combination. The Company believes it is likely that it will be required to obtain additional funding in order to continue its operations for the next 12 months. If a business combination transaction does not occur, management believes that a substantial portion of such fees will not be required to be paid or will be substantially reduced.
Additionally, related parties have paid certain offering and operating costs as needed. As of September 30, 2022, the Company owed $40,000 to the related parties on account of unreimbursed expenses incurred in connection with the sourcing of its initial Business Combination and the transactions contemplated by the Merger Agreement.
In order to finance transaction costs in connection with a Business Combination, the Company’s Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, provide Working Capital Loans to the Company (see Note 5). As of September 30, 2022 and December 31, 2021, there were no amounts outstanding under any Working Capital Loans.
In connection with the Company’s assessment of going concern considerations in accordance with FASB’s Accounting Standards Codification Subtopic 205-40, “Presentation of Financial Statements—Going Concern,” management has determined that if the Company is unable to raise additional funds to alleviate liquidity needs, obtain approval for an extension of the deadline or complete a Business Combination by March 8, 2023, then the Company will cease all operations except for the purpose of liquidating. The Company intends to complete a Business Combination before the mandatory liquidation date or obtain approval for an extension, however, it is uncertain whether the Company will be able to do so. If a Business Combination is not consummated by this date and an extension not requested by the Sponsor, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and the mandatory liquidation, should a Business Combination not occur and an extension is not requested by the Sponsor, and potential subsequent dissolution, raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after March 8, 2023. |
Summary of Significant Accounting Policies |
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| Description of Organization and Business Operations and Going Concern [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the U.S. Securities and Exchanges Commission (“SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected through December 31, 2022.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2021.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act” ), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(l) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of financial statements in conformity with 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 financial statements and the reported amounts of income and expenses during the reporting periods.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these condensed financial statements is the determination of the fair value of the warrant liabilities. 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 had $211,124 and $987,254 in cash as of September 30, 2022 and December 31, 2021, respectively. The Company had no cash equivalents (other than assets held in the Trust Account) at September 30, 2022 and December 31, 2021.
Marketable Securities Held in Trust Account
At December 31, 2021, the assets held in the Trust Account were substantially held in mutual funds that invest primarily in U.S. government securities and at September 30, 2022, such assets instead were substantially held in U.S. government securities. Marketable Securities held in the Trust Account are classified as trading securities.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Deposit Insurance Corporation coverage limit of $250,000. At September 30, 2022 and December 31, 2021, the Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Conditionally redeemable Class A common stock (including 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) is classified as temporary equity. At all other times, Class A common stock is classified as stockholders’ equity.
The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ deficit section of the Company’s balance sheets.
Net Income (Loss) per Common Share
Net income (loss) per common stock is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for each of the period. The calculation of diluted income (loss) per common stock does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering or (ii) Private Placement Warrants because the exercise of the warrants is contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. Such warrants are exercisable to purchase 20,833,333 shares of Class A common stock in the aggregate following a business combination.
The Company’s statements of operations include a presentation of income (loss) per share for Class A Common Stock subject to possible redemption in a manner similar to the two-class method of income (loss) per common stock. As of September 30, 2022 and 2021, the Company had dilutive securities consisting of 20,833,333 warrants that could, potentially, be exercised or converted into common stock, however because of the net income (loss) they are considered anti-dilutive instruments. As a result, diluted loss per share is the same as basic income (loss) per share for the periods presented.
The underwriters had a 45-day option from the effectiveness date of the IPO (March 3, 2021) to purchase up to an additional 6,000,000 units to cover over-allotments, if any. That option expired without being exercised on April 17, 2021.
Below is a reconciliation of the net income (loss) per common stock:
Offering Costs associated with the Initial Public Offering
The Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A “Expenses of Offering”. Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the Public Offering. Offering costs are charged to stockholders’ equity or the Statement of Operations based on the residual method of the Public and Private Warrants to the proceeds received from the Units sold upon the completion of the IPO. Accordingly offering costs totaling $22,706,155 (consisting of $8,000,000 of underwriting discount, $14,000,000 of deferred underwriting discount, and $706,155 of other offering costs) were recognized with $1,265,712 allocated to the Public Warrants, Overallotment Option and Private Warrants, included in the Statements of Operations as a component of Other income (expenses) and $21,440,443 included in temporary equity.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature. The fair value of the warrant liabilities are discussed below.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are recorded at fair value on the grant date and re- valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The Company has determined the warrants are a derivative instrument. FASB ASC 470-20, “Debt with Conversion and Other Options” addresses the allocation of proceeds from the issuance of convertible debt into its equity and debt components. The Company applies this guidance to allocate IPO proceeds from the Units between Class A common stock and warrants, using the residual method by allocating IPO proceeds first to fair value of the warrants and then to the Class A common stock. 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. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the unaudited condensed financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of September 30, 2022 and December 31, 2021, the Company’s deferred tax asset had a full valuation allowance recorded against it. Our effective tax rate was 11.02% and 0% for the three months ended September 30, 2022 and 2021, and 0.84% and 0% for the nine months ended September 30, 2022 and 2021. The effective tax rate differs from the statutory tax rate of 21% for the three and nine months ended September 30, 2022 and 2021, due to changes in fair value in warrant liability and the valuation allowance on the deferred tax assets.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2022 and December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Recently Adopted Accounting Standards
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — “Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2024 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company adopted ASU 2020-06 effective January 1, 2022. The adoption of ASU 2020- 06 does not have an impact on the Company’s financial statements.
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements. |
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Initial Public Offering |
9 Months Ended | ||||||||||||
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| Regulated Operations [Abstract] | |||||||||||||
| INITIAL PUBLIC OFFERING | NOTE 3. INITIAL PUBLIC OFFERING
On March 8, 2021, the Company consummated the IPO of 40,000,000 units (the “Units”), at a purchase price of $10.00 per Unit. Each Unit consists of one share of Class A common stock, and one-third warrant to purchase one share of Class A common stock. Each warrant will entitle the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment. Each warrant will become exercisable on the later of 30 days after the completion of the initial business combination or 12 months from the closing of the IPO and will expire five years after the completion of the initial business combination, or earlier upon redemption or liquidation. (See Note 7).
The underwriters were granted a 45-day option from the effective date of the IPO (March 3, 2021) to purchase up to an additional 6,000,000 units to cover over-allotments. The option expired unexercised.
Warrants
Each whole warrant entitles the registered holder to purchase one whole share of the Company’s Class A common stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time commencing on the later of 12 months from the IPO or 30 days after the completion of the Company’s initial business combination.
Pursuant to the warrant agreement, a warrant holder may exercise its warrants only for a whole number of shares of Class A common stock. This means that only a whole warrant may be exercised at any given time by a warrant holder. No fractional warrants will be issued upon separation of the units and only whole warrants will trade. Accordingly, unless you purchase at least three units, you will not be able to receive or trade a whole warrant. The warrants will expire five years after the completion of the Company’s initial business combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying the Company’s obligations described below with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In no event will the Company be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of Class A common stock underlying such unit.
The Company has agreed that as soon as practicable, but in no event later than thirty (30) days, after the closing of the Company’s initial business combination, the Company will use commercially reasonable efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of Class A common stock issuable upon exercise of the warrants. The Company will use commercially reasonable efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective within 90 days after the closing of the Company’s initial business combination, warrant holders may, under the circumstances specified in the warrant agreement and until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis.
Once the warrants become exercisable, the Company may call the warrants for redemption:
If and when the warrants become redeemable by the Company, the Company may exercise the Company’s redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
The Company has established the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and the Company issues a notice of redemption of the warrants, each warrant holder will be entitled to exercise his, her or its warrant prior to the scheduled redemption date. However, the price of the Class A common stock may fall below the $18.00 redemption trigger price as well as the $11.50 warrant exercise price (for whole shares) after the redemption notice is issued without affecting the right of the Company to consummate such redemption.
If the Company calls the warrants for redemption as described above, the Company’s management will have the option to require any holder that wishes to exercise his, her or its warrant to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” the Company’s management will consider, among other factors, the Company’s cash position, the number of warrants that are outstanding and the dilutive effect on the Company’s stockholders of issuing the maximum number of shares of Class A common stock issuable upon the exercise of the Company’s warrants. If the Company’s management takes advantage of this option, all holders of warrants would pay the exercise price by surrendering their warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. If the Company’s management takes advantage of this option, the notice of redemption will contain the information necessary to calculate the number of shares of Class A common stock to be received upon exercise of the warrants, including the “fair market value” in such case. Requiring a cashless exercise in this manner will reduce the number of shares to be issued and thereby lessen the dilutive effect of a warrant redemption. We believe this feature is an attractive option to the Company if the Company does not need the cash from the exercise of the warrants after the Company’s initial business combination. If the Company calls the Company’s warrants for redemption and the Company’s management does not take advantage of this option, the Company’s sponsor and its permitted transferees would still be entitled to exercise their private placement warrants contained in the private placement warrants for cash or on a cashless basis using the same formula described above that other warrant holders would have been required to use had all warrant holders been required to exercise their warrants on a cashless basis, as described in more detail below.
A holder of a warrant may notify the Company in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such warrant to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the warrant agent’s actual knowledge, would beneficially own in excess of 9.8% (or such other amount as a holder may specify) of the shares of Class A common stock outstanding immediately after giving effect to such exercise.
If the number of outstanding shares of Class A common stock is increased by a stock dividend payable in shares of Class A common stock, or by a split- up of shares of Class A common stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of Class A common stock issuable on exercise of each warrant will be increased in proportion to such increase in the outstanding shares of Class A common stock. A rights offering to holders of Class A common stock entitling holders to purchase shares of Class A common stock at a price less than the fair market value will be deemed a stock dividend of a number of shares of Class A common stock equal to the product of (i) the number of shares of Class A common stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for Class A common stock) multiplied by (ii) one (1) minus the quotient of (x) the price per share of Class A common stock paid in such rights offering divided by (y) the fair market value. For these purposes (i) if the rights offering is for securities convertible into or exercisable for Class A common stock, in determining the price payable for Class A common stock, there will be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) fair market value means the volume weighted average price of Class A common stock as reported during the ten (10) trading day period ending on the trading day prior to the first date on which the shares of Class A common stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.
In addition, if the Company, at any time while the warrants are outstanding and unexpired, pays a dividend or makes a distribution in cash, securities or other assets to the holders of Class A common stock on account of such shares of Class A common stock (or other shares of the Company’s capital stock into which the warrants are convertible), other than (a) as described above, (b) certain ordinary cash dividends of which are dividends up to $0.50 per share per year, (c) to satisfy the redemption rights of the holders of Class A common stock in connection with a proposed initial business combination, (d) as a result of the repurchase of shares of Class A common stock by the company if the proposed initial business combination is presented to the stockholders of the Company for approval, or (e) in connection with the redemption of the Company’s public shares upon the Company’s failure to complete the Company’s initial business combination, then the warrant exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each share of Class A common stock in respect of such event. No other adjustments will be required to be made including for issuing Class A common stock at below market price and/or exercise price. If the number of outstanding shares of the Company’s Class A common stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of Class A common stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of Class A common stock issuable on exercise of each warrant will be decreased in proportion to such decrease in outstanding shares of Class A common stock.
Whenever the number of shares of Class A common stock purchasable upon the exercise of the warrants is adjusted, as described above, the warrant exercise price will be adjusted by multiplying the warrant exercise price immediately prior to such adjustment by a fraction (x) the numerator of which will be the number of shares of Class A common stock purchasable upon the exercise of the warrants immediately prior to such adjustment, and (y) the denominator of which will be the number of shares of Class A common stock so purchasable immediately thereafter.
In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of the Company’s initial business combination at an issue price or effective issue price of less than $9.20 per common share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Company’s sponsor or its affiliates, without taking into account any founder shares held by the Company’s sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the Company’s initial business combination on the date of the consummation of the Company’s initial business combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s Class A common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates the Company’s initial business combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
In case of any reclassification or reorganization of the outstanding shares of Class A common stock (other than those described above or any that solely affects the par value of such shares of Class A common stock), or in the case of any merger or consolidation of the Company with or into another corporation (other than a consolidation or merger in which the Company is are the continuing corporation and that does not result in any reclassification or reorganization of the Company’s outstanding shares of Class A common stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the holders of the warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the warrants and in lieu of the shares of the Company’s Class A common stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the warrants would have received if such holder had exercised their warrants immediately prior to such event. However, if such holders were entitled to exercise a right of election as to the kind or amount of securities, cash or other assets receivable upon such consolidation or merger, then the kind and amount of securities, cash or other assets for which each warrant will become exercisable will be deemed to be the weighted average of the kind and amount received per share by such holders in such consolidation or merger that affirmatively make such election, and if a tender, exchange or redemption offer has been made to and accepted by such holders (other than a tender, exchange or redemption offer made by the company in connection with redemption rights held by stockholders of the company as provided for in the company’s amended and restated certificate of incorporation or as a result of the repurchase of shares of Class A common stock by the company if a proposed initial business combination is presented to the stockholders of the company for approval) under circumstances in which, upon completion of such tender or exchange offer, the maker thereof, together with members of any group (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) of which such maker is a part, and together with any affiliate or associate of such maker (within the meaning of Rule 12b-2 under the Exchange Act) and any members of any such group of which any such affiliate or associate is a part, own beneficially (within the meaning of Rule 13d-3 under the Exchange Act) more than 50% of the outstanding shares of Class A common stock, the holder of a warrant will be entitled to receive the highest amount of cash, securities or other property to which such holder would actually have been entitled as a stockholder if such warrant holder had exercised the warrant prior to the expiration of such tender or exchange offer, accepted such offer and all of the Class A common stock held by such holder had been purchased pursuant to such tender or exchange offer, subject to adjustments (from and after the consummation of such tender or exchange offer) as nearly equivalent as possible to the adjustments provided for in the warrant agreement. Additionally, if less than 70% of the consideration receivable by the holders of Class A common stock in such a transaction is payable in the form of Class A common stock in the successor entity that is listed for trading on a national securities exchange or is quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately following such event, and if the registered holder of the warrant properly exercises the warrant within thirty days following public disclosure of such transaction, the warrant exercise price will be reduced as specified in the warrant agreement based on the per share consideration minus Black-Scholes Warrant Value (as defined in the warrant agreement) of the warrant.
The warrants will be issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and the Company. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any mistake, including to conform the provisions of the warrant agreement to the description of the terms of the warrants and the warrant agreement set forth in this prospectus, or to correct any defective provision, but requires the approval by the holders of at least 50% of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants. A change affecting the terms of the private placement warrants will require the approval of holders of at least 50% of the private placement warrants.
The warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to the Company, for the number of warrants being exercised. The warrant holders do not have the rights or privileges of holders of Class A common stock and any voting rights until they exercise their warrants and receive shares of Class A common stock. After the issuance of shares of Class A common stock upon exercise of the warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.
Warrants may be exercised only for a whole number of shares of Class A common stock. No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, the Company will, upon exercise, round down to the nearest whole number the number of shares of Class A common stock to be issued to the warrant holder. As a result, warrant holders not purchasing an even number of warrants must sell any odd number of warrants in order to obtain full value from the fractional interest that will not be issued.
The private placement warrants (including the 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 the Company’s initial business combination (except, among other limited exceptions as described under “Principal Stockholders— Transfers of Founder Shares and Private Placement Warrants,” to the Company’s officers and directors and other persons or entities affiliated with the sponsor) and they will not be redeemable by the Company so long as they are held by the sponsor or its permitted transferees. Otherwise, the private placement warrants have terms and provisions that are identical to those of the warrants being sold as part of the units in the IPO. If the private placement warrants are held by holders other than the sponsor or its permitted transferees, the private placement warrants will be redeemable by the Company and exercisable by the holders on the same basis as the warrants included in the units being sold in the IPO.
If holders of the private placement warrants elect to exercise them on a cashless basis, they would pay the exercise price by surrendering his, her or its warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of warrant exercise is sent to the warrant agent. The reason that the Company has agreed that these warrants will be exercisable on a cashless basis so long as they are held by the Company’s sponsor and permitted transferees is because it is not known at this time whether they will be affiliated with the Company following a business combination. If they remain affiliated with the Company, their ability to sell the Company’s securities in the open market will be significantly limited. We expect to have policies in place that prohibit insiders from selling the Company’s securities except during specific periods of time. Even during such periods of time when insiders will be permitted to sell the Company’s securities, an insider cannot trade in the Company’s securities if he or she is in possession of material non-public information. Accordingly, unlike public stockholders who could exercise their warrants and sell the shares of Class A common stock received upon such exercise freely in the open market in order to recoup the cost of such exercise, the insiders could be significantly restricted from selling such securities. As a result, The Company believes that allowing the holders to exercise such warrants on a cashless basis is appropriate.
In order to finance transaction costs in connection with an intended initial business combination, the Company’s sponsor or an affiliate of the Company’s sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required. If the Company completes the Company’s initial business combination, the Company would repay such loaned amounts out of the proceeds of the trust account released to the Company. In the event that the Company’s initial business combination does not close, the Company may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from the Company’s trust account would be used to repay such loaned amounts. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.50 per warrant at the option of the lender. Such warrants would be identical to the private placement warrants, including as to exercise price, exercisability and exercise period. Except for the foregoing, the terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. |
Private Placement |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Private Placement [Abstract] | |
| PRIVATE PLACEMENT | NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the IPO, the Sponsor and the Representatives purchased an aggregate of 7,500,000 Private Warrants at a purchase price of $1.50 per Private Unit, generating gross proceeds to the Company of $11,250,000. Except to the extent described in Note 3 above, the Private Warrants (and the underlying securities) are identical to the Warrants sold as part of the Units in the IPO. At the issuance date of March 8, 2021, the fair value of the Private Warrants was determined to be $11,779,653; $529,653 in excess of the $11,250,000 received by the Company. This excess fair value of $529,653 is recognized as an expense in the statement of operations. |
Related Parties |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Related Parties [Abstract] | |
| RELATED PARTIES | NOTE 5. RELATED PARTIES
Founder Shares
On December 31, 2020, the Sponsor purchased 7,187,500 shares of Class B common stock (the “Founder Shares”) for $25,000, or approximately $0.003 per share. On February 11, 2021, the Company effected a stock split, by means of issuing an additional 1,437,500 founder shares, paid out of the Company’s share premium account and accordingly credited as fully paid, to the Company’s sponsor, resulting in 8,625,000 founder shares issued and outstanding. On February 19, 2021, the Company effected a further stock split, by means of issuing an additional 2,875,000 founder shares, paid out of the Company’s share premium account and accordingly credited as fully paid, to the Company’s sponsor, resulting in 11,500,000 founder shares issued and outstanding. All shares and associated amounts have been retroactively restated to reflect the stock splits (see Note 8). The Founder Shares are identical to the Class A common stock included in the Units sold in the IPO except that the Founder Shares are subject to certain transfer restrictions, as described in more detail below. Each Founder Share is automatically convertible to a share of Class A common stock on a one-for-one basis at the time of the Company’s initial business combination. The Sponsor had agreed to forfeit up to 1,500,000 Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriters. Because the underwriter did not exercise its option, the forfeiture was enacted in 2021.
The Company’s initial stockholders have agreed not to transfer, assign or sell any of their Founder Shares until the earlier of (A) one year after the completion of the Company’s initial Business Combination, or earlier if, subsequent to the Company’s initial Business Combination, the last sale price of the Company’s 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 Company’s initial Business Combination or (B) the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction after the initial Business Combination that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property (the “Lock Up Period”).
Due to Related Party
The amount due to related parties prior to the closing of the IPO of $128,628 for the payment of certain offering costs and taxes was repaid on March 16, 2021.
As of September 30, 2022 and December 31, 2021, the Company owed approximately $40,000 to related parties on account of reimbursed expenses incurred in connection with the sourcing of its initial business combination.
Working Capital Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $1,500,000 of such Working Capital Loans may be convertible into warrants at a price of $1.50 per warrant agreement per warrant at the option of the lender. The warrants would be identical to the private placement warrants, including as to exercise price, exercisability and exercise period. At September 30, 2022 and December 31, 2021, no Working Capital Loans were outstanding. |
Commitments and Contingencies |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| COMMITMENTS AND CONTINGENCIES | NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the founder shares and private placement warrants and any warrants that may be issued upon conversion of working capital loans (and any Class A common stock issuable upon the exercise of the private placement warrants and warrants that may be issued upon conversion of working capital loans) will be entitled to registration rights pursuant to a registration and stockholder rights agreement to be signed prior to or on the effective date of the IPO. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities.
In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the Company’s completion of the Company’s initial business combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
On March 8, 2021, the underwriters were paid a cash underwriting discount of 2% of the gross proceeds of the IPO, or $8,000,000. The underwriters are entitled to a deferred fee of $0.35 per Unit, or $14,000,000 in the aggregate. The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement. The underwriters had a 45-day option from the date of the IPO to purchase up to an additional 6,000,000 units to cover over-allotments, which expired unexercised.
The Company has entered into agreements with certain advisors and professionals who will receive payments under contingent fee arrangements upon completion of the transactions contemplated by the Merger Agreement, estimated to be approximately $14.3 million. The ultimate amount of such payments will be quantified at or near the time of closing.
Transaction-Related Fees
In connection with the now-terminated merger agreement with Syniverse Corporation, the Company entered into agreements with certain professional service advisors in which approximately $11 million of fees in the aggregate would have been payable upon consummation of such merger agreement. These fees include a contractual and contingent component. As a result of the termination of the merger agreement on February 9, 2022, such fees will not be payable and the contractual component was derecognized during the quarter ended March 31, 2022.
Asserted and Unasserted Claims
On October 15, 2021, Adam Snitkoff, a purported stockholder of the Company, filed a complaint in the Supreme Court of the State of New York (the “Snitkoff Litigation”), naming the Company, Syniverse and the directors of the Company as defendants. The complaint alleged claims for fraudulent and negligent misrepresentation and concealment in connection with allegedly false and misleading statements and omissions in the Company’s proxy statement concerning the proposed Business Combination. The complaint sought, among other things, injunctive relief and compensatory damages.
In addition, the Company received letters from certain purported shareholders or representatives thereof (the “Demand Letters”) demanding that changes be made to the disclosures contained in the Company’s proxy statement, which demands were, in the aggregate, substantially similar to the claims made in the Snitkoff Litigation. No litigation was commenced or threatened with respect to those letters.
The Snitkoff Litigation was terminated pursuant to Notice of Voluntary Discontinuance with Prejudice on February 4, 2022 and the termination of the merger agreement with Syniverse rendered the claims in the Snitkoff Litigation and the Demand Letters moot. In the opinion of the Company, the claims asserted in the Snikoff Litigation and the Demand Letters will not have a material adverse effect on our financial position, results of operations or the cash flow.
Termination of Proposed Transaction
On February 9, 2022, the proposed transaction with Syniverse Corporation was terminated. The Company was able to negotiate a reduction of substantial portion of professional fees incurred in connection with the proposed transaction which are recorded in the accounts of the Company at December 31, 2021. |
Class A Common Stock Subject to Possible Redemption |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class A Common Stock Subject to Possible Redemption [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CLASS A COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION | NOTE 7. CLASS A COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION
At September 30, 2022 and December 31, 2021, Class A common stock subject to possible redemption is classified as a liability instrument and is measured at fair value. A summary of the activity in the account is summarized as follows:
|
Stockholders’ Deficit |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Stockholders’ Deficit [Abstract] | |
| STOCKHOLDERS’ DEFICIT | NOTE 8. STOCKHOLDERS’ DEFICIT
Preferred Stock — The Company is authorized to issue a total of 1,000,000 shares of preferred stock at par value of $0.0001 each. At September 30, 2022 and December 31, 2021, there were no preferred shares issued or outstanding.
Class A common stock — The Company is authorized to issue a total of 450,000,000 shares of Class A common stock at par value of $0.0001 each. As of September 30, 2022 and December 31, 2021, 40,000,000 shares of Class A common stock subject to possible redemption issued and outstanding.
Class B common stock — The Company is authorized to issue a total of 50,000,000 shares of Class B common stock at par value of $0.0001 each. On December 31, 2020, the Sponsor purchased 7,187,500 shares of Class B common stock (the “Founder Shares”) for $25,000, or approximately $0.003 per share. On February 11, 2021, the Company effected a stock split, by means of issuing an additional 1,437,500 founder shares, paid out of the Company’s share premium account and accordingly credited as fully paid, to the Company’s sponsor, resulting in 8,625,000 founder shares issued and outstanding. On February 19, 2021, the Company effected a further stock split, by means of issuing an additional 2,875,000 founder shares, paid out of the Company’s share premium account and accordingly credited as fully paid, to the Company’s sponsor, resulting in 11,500,000 founder shares issued and outstanding. All shares and associated amounts have been retroactively restated to reflect the stock splits (see Note 5). This number includes 1,500,000 shares of Class B common stock which were forfeited because the over-allotment option was not exercised by the underwriters (See Note 5). At September 30, 2022 and December 31, 2021, there were 10,000,000 shares issued and outstanding.
The Company’s initial stockholders have agreed not to transfer, assign or sell any of their Founder Shares until the earlier of (A) one year after the completion of the Company’s initial Business Combination, or earlier if, subsequent to the Company’s initial Business Combination, the last sale price of the Company’s 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 Company’s initial Business Combination or (B) the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction after the initial Business Combination that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property (the “Lock Up Period”).
The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of our 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 sold in the IPO and related to the closing of the 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, 20% of the sum of the total number of all shares of common stock outstanding upon completion of the IPO plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the business combination.
With respect to any other matter submitted to a vote of our stockholders, including any vote in connection with our initial business combination, except as required by law, holders of our founder shares and holders of our public shares will vote together as a single class, with each share entitling the holder to one vote. |
Recurring Fair Value Measurements |
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| Recurring Fair Value Measurements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RECURRING FAIR VALUE MEASUREMENTS | NOTE 9. RECURRING FAIR VALUE MEASUREMENTS
Investment Held in Trust Account
As of September 30, 2022, investment securities in the Company’s Trust Account consisted of U.S. government securities in the amount of $402,058,201 and as of December 31, 2021, investment securities in the Company’s Trust Account consisted of a mutual funds that invest primarily in U.S. government securities in the amount of $400,034,264. Since all of the Company’s permitted investments consist of treasury securities, fair values of its investments are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assets.
Warrant Liability
At September 30, 2022 and December 31, 2021, there were 13,333,333 public warrants for the purchase of Class A shares at $11.50 per share and 7,500,000 private warrants for the purchase of Class B shares at $1.50 per share. At September 30, 2022 and December 31, 2021, the Company’s warrants liability was valued at $1,379,967 and $26,645,622, respectively. Under the guidance in ASC 815-40 the warrants do not meet the criteria for equity treatment. As such, the warrants must be recorded on the balance sheet at fair value. This valuation is subject to re-measurement at each balance sheet date. With each re-measurement, the warrant valuation will be adjusted to fair value, with the change in fair value recognized in the Company’s statements of operations.
Overallotment Option
Upon completion the IPO, the underwriters held an overallotment option which expired 45 days later. The overallotment option represents a financials instrument which was recognized at fair value as a liability instrument at inception. The principal assumptions going into the fair value computation were as follows: Term – 45 days; Unit price $10.00, risk free rate 0.04%, volatility 16.7%. Upon expiration, the change in fair value to zero was recognized in the Company’s statement of operations.
Recurring Fair Value Measurements
The Company’s investments consist of U.S. government securities or mutual funds that invest primarily in U.S. government securities. Fair values of these investments are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assets. The Company’s warrant liability (including Public Warrants prior to trading separately on April 26, 2021) is based on a valuation model utilizing management judgment and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in a material change in fair value. The fair value of the private warrant liability is classified within Level 3 of the fair value hierarchy. The Public Warrants were transferred to Level 1 for the period ending December 31, 2021.
The following table presents fair value information as of September 30, 2022 of the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
The following table presents fair value information as of December 31, 2021 of the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
Measurement
The Company established the initial fair value for the Warrants as of March 8, 2021, which was the date of the consummation of the Company’s IPO, and on September 30, 2022. On December 31, 2021 the fair value was remeasured. For the initial periods, neither the Public Warrants nor the Private Warrants were separately traded on an open market, but the Public Warrants did commence separate trading as of April 26, 2021. As such, the Company used a Monte Carlo simulation model to value the Warrants for the initial periods and valued the Public Warrants based upon market values for the December 31,2021 remeasurement. The Company allocated the proceeds received from (i) the sale of Units (which is inclusive of one share of Class A common stock and one-third of one Public Warrant), (ii) the sale of Private Warrants, and (iii) the issuance of Class B common stock, first to the Warrants based on their fair values as determined at initial measurement, with the remaining proceeds allocated to Class A common stock subject to possible redemption (temporary equity), Class A common stock (permanent equity) and Class B common stock (permanent equity) based on their relative fair values at the initial measurement date. The Warrants were classified within Level 3 of the fair value hierarchy at the initial measurement dates due to the use of unobservable inputs. The aggregate fair value of the Public Warrants, which amounted to $20,553,963 at the closing date of the IPO, was transferred to Level 1 following the detachment of the warrants for separate trading and at which time quoted prices existed in active markets. The key inputs into the Monte Carlo simulation model for the Warrants were as follows at December 31, 2021 and at September 30, 2022 for the private warrants:
The change in the fair value of the level 3 warrant liabilities for the three and nine months ended September 30, 2022 is summarized as follows:
The change in the fair value of the level 3 warrant liabilities for the three and nine months ended September 30, 2021 is summarized as follows:
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Subsequent Events |
9 Months Ended |
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Sep. 30, 2022 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 10. SUBSEQUENT EVENTS
The Company evaluated events and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Based upon this review, other than outlined below, the Company did not identify any events that would have required adjustment to or disclosure in the condensed financial statements.
On October 31, 2022, the Company filed with the Securities and Exchange Commission an initial draft of its Notice of Special Meeting to propose and seek stockholders’ approval to amend the Company’s Amended and Restated Certificate of Incorporation (“Charter”) to extend the date by which the Company must consummate a business combination from March 8, 2023 to March 8, 2024 and to amend the Charter to permit the release of interest from the Trust Account to the extent that such interest is accrued after the date of Interest Amendments to pay the Company’s working capital expenses.
In connection with the consummation of the transactions contemplated by the extension and working capital amendment proposal, public stockholders may elect to redeem all of their public shares for a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account as of two business days prior to such approval, including interest not previously released to the Company to pay taxes, divided by the number of then-outstanding public shares. |
Accounting Policies, by Policy (Policies) |
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| Description of Organization and Business Operations and Going Concern [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the U.S. Securities and Exchanges Commission (“SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected through December 31, 2022.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2021.
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| Emerging Growth Company | Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act” ), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(l) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
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| Use of Estimates | Use of Estimates
The preparation of 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 financial statements and the reported amounts of income and expenses during the reporting periods.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these condensed financial statements is the determination of the fair value of the warrant liabilities. Accordingly, the actual results could differ significantly from those estimates.
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| Cash and Cash Equivalents | Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had $211,124 and $987,254 in cash as of September 30, 2022 and December 31, 2021, respectively. The Company had no cash equivalents (other than assets held in the Trust Account) at September 30, 2022 and December 31, 2021.
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| Marketable Securities Held in Trust Account | Marketable Securities Held in Trust Account
At December 31, 2021, the assets held in the Trust Account were substantially held in mutual funds that invest primarily in U.S. government securities and at September 30, 2022, such assets instead were substantially held in U.S. government securities. Marketable Securities held in the Trust Account are classified as trading securities.
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| Concentration of Credit Risk | Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Deposit Insurance Corporation coverage limit of $250,000. At September 30, 2022 and December 31, 2021, the Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
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| Class A Common Stock Subject to Possible Redemption | Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Conditionally redeemable Class A common stock (including 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) is classified as temporary equity. At all other times, Class A common stock is classified as stockholders’ equity.
The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ deficit section of the Company’s balance sheets.
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| Net Income (Loss) per Common Share | Net Income (Loss) per Common Share
Net income (loss) per common stock is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for each of the period. The calculation of diluted income (loss) per common stock does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering or (ii) Private Placement Warrants because the exercise of the warrants is contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. Such warrants are exercisable to purchase 20,833,333 shares of Class A common stock in the aggregate following a business combination.
The Company’s statements of operations include a presentation of income (loss) per share for Class A Common Stock subject to possible redemption in a manner similar to the two-class method of income (loss) per common stock. As of September 30, 2022 and 2021, the Company had dilutive securities consisting of 20,833,333 warrants that could, potentially, be exercised or converted into common stock, however because of the net income (loss) they are considered anti-dilutive instruments. As a result, diluted loss per share is the same as basic income (loss) per share for the periods presented.
The underwriters had a 45-day option from the effectiveness date of the IPO (March 3, 2021) to purchase up to an additional 6,000,000 units to cover over-allotments, if any. That option expired without being exercised on April 17, 2021.
Below is a reconciliation of the net income (loss) per common stock:
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| Offering Costs associated with the Initial Public Offering | Offering Costs associated with the Initial Public Offering
The Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A “Expenses of Offering”. Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the Public Offering. Offering costs are charged to stockholders’ equity or the Statement of Operations based on the residual method of the Public and Private Warrants to the proceeds received from the Units sold upon the completion of the IPO. Accordingly offering costs totaling $22,706,155 (consisting of $8,000,000 of underwriting discount, $14,000,000 of deferred underwriting discount, and $706,155 of other offering costs) were recognized with $1,265,712 allocated to the Public Warrants, Overallotment Option and Private Warrants, included in the Statements of Operations as a component of Other income (expenses) and $21,440,443 included in temporary equity.
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| Fair Value of Financial Instruments | Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature. The fair value of the warrant liabilities are discussed below.
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| Derivative Financial Instruments | Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are recorded at fair value on the grant date and re- valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The Company has determined the warrants are a derivative instrument. FASB ASC 470-20, “Debt with Conversion and Other Options” addresses the allocation of proceeds from the issuance of convertible debt into its equity and debt components. The Company applies this guidance to allocate IPO proceeds from the Units between Class A common stock and warrants, using the residual method by allocating IPO proceeds first to fair value of the warrants and then to the Class A common stock. |
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| Fair Value Measurements | 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. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
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| Income Taxes | Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the unaudited condensed financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of September 30, 2022 and December 31, 2021, the Company’s deferred tax asset had a full valuation allowance recorded against it. Our effective tax rate was 11.02% and 0% for the three months ended September 30, 2022 and 2021, and 0.84% and 0% for the nine months ended September 30, 2022 and 2021. The effective tax rate differs from the statutory tax rate of 21% for the three and nine months ended September 30, 2022 and 2021, due to changes in fair value in warrant liability and the valuation allowance on the deferred tax assets.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2022 and December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
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| Recently Adopted Accounting Standards | Recently Adopted Accounting Standards
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — “Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2024 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company adopted ASU 2020-06 effective January 1, 2022. The adoption of ASU 2020- 06 does not have an impact on the Company’s financial statements.
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements. |
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Summary of Significant Accounting Policies (Tables) |
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| Schedule of reconciliation of the net income per common stock |
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Class A Common Stock Subject to Possible Redemption (Tables) |
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| Schedule of common stock subject to possible redemption |
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Recurring Fair Value Measurements (Tables) |
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| Recurring Fair Value Measurements Tables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of assets and liabilities that were accounted for at fair value on a recurring basis |
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| Schedule of fair value measurements inputs |
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| Schedule of fair value of the warrant liabilities |
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Summary of Significant Accounting Policies (Details) - Schedule of reconciliation of the net income per common stock - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
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| Class A [Member] | ||||
| Numerator: | ||||
| Allocation of net income (loss), as adjusted | $ 1,697,557 | $ (5,416,396) | $ 24,832,134 | $ (3,789,155) |
| Denominator: | ||||
| Basic and diluted weighted average shares outstanding | 40,000,000 | 40,000,000 | 40,000,000 | 30,183,150 |
| Basic and diluted net income (loss) per common stock | $ 0.04 | $ (0.14) | $ 0.62 | $ (0.13) |
| Class B [Member] | ||||
| Numerator: | ||||
| Allocation of net income (loss), as adjusted | $ 424,389 | $ (1,354,099) | $ 6,208,034 | $ (1,255,387) |
| Denominator: | ||||
| Basic and diluted weighted average shares outstanding | 10,000,000 | 10,000,000 | 10,000,000 | 10,000,000 |
| Basic and diluted net income (loss) per common stock | $ 0.04 | $ (0.14) | $ 0.62 | $ (0.13) |
Summary of Significant Accounting Policies (Details) - Schedule of reconciliation of the net income per common stock (Parentheticals) - $ / shares |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
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| Class A [Member] | ||||
| Summary of Significant Accounting Policies (Details) - Schedule of reconciliation of the net income per common stock (Parentheticals) [Line Items] | ||||
| Diluted weighted average shares outstanding | 40,000,000 | 40,000,000 | 40,000,000 | 30,183,150 |
| Diluted net income per common stock | $ 0.04 | $ (0.14) | $ 0.62 | $ (0.13) |
| Class B [Member] | ||||
| Summary of Significant Accounting Policies (Details) - Schedule of reconciliation of the net income per common stock (Parentheticals) [Line Items] | ||||
| Diluted weighted average shares outstanding | 10,000,000 | 10,000,000 | 10,000,000 | 10,000,000 |
| Diluted net income per common stock | $ 0.04 | $ (0.14) | $ 0.62 | $ (0.13) |
Private Placement (Details) - USD ($) |
9 Months Ended | |
|---|---|---|
Mar. 08, 2021 |
Sep. 30, 2022 |
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| Private Placement (Details) [Line Items] | ||
| Fair value | $ 11,779,653 | |
| Excess fair value | $ 529,653 | |
| Private Warrants [Member] | ||
| Private Placement (Details) [Line Items] | ||
| Fair value | 529,653 | |
| Excess fair value | $ 11,250,000 | |
| Private Warrants [Member] | Sponsor [Member] | ||
| Private Placement (Details) [Line Items] | ||
| Purchased an aggregate shares (in Shares) | 7,500,000 | |
| Purchase price per unit (in Dollars per share) | $ 1.5 | |
| Gross proceeds | $ 11,250,000 |
Related Parties (Details) - USD ($) |
9 Months Ended | 12 Months Ended | ||||
|---|---|---|---|---|---|---|
Sep. 30, 2022 |
Dec. 31, 2021 |
Mar. 16, 2021 |
Feb. 19, 2021 |
Feb. 11, 2021 |
Dec. 31, 2020 |
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| Related Parties (Details) [Line Items] | ||||||
| Issuing an additional founder shares | 2,875,000 | 1,437,500 | ||||
| Founder shares issued and outstanding | 11,500,000 | 8,625,000 | ||||
| Common stock equals or exceeds per share (in Dollars per share) | $ 18 | |||||
| Payment of certain offering costs and taxes was repaid (in Dollars) | $ 128,628 | |||||
| Expenses incurred (in Dollars) | $ 40,000 | $ 40,000 | ||||
| Working Capital Loan (in Dollars) | $ 1,500,000 | |||||
| Price per warrant (in Dollars per share) | $ 1.5 | |||||
| Founder Shares [Member] | ||||||
| Related Parties (Details) [Line Items] | ||||||
| Sponsor purchased shares | 7,187,500 | |||||
| Founder shares (in Dollars) | $ 25,000 | |||||
| Price per share (in Dollars per share) | $ 0.003 | |||||
| Founder Shares agreed to forfeit | 1,500,000 | |||||
| Common stock equals or exceeds per share (in Dollars per share) | $ 12 |
Commitments and Contingencies (Details) - USD ($) |
9 Months Ended | |
|---|---|---|
Mar. 08, 2021 |
Sep. 30, 2022 |
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| Commitments and Contingencies (Details) [Line Items] | ||
| Cash underwriting discount in percentage | 2.00% | |
| Gross proceeds | $ 8,000,000 | |
| Contingent fee | $ 14,300,000 | |
| Professional service | $ 11,000,000 | |
| Over-Allotment Option [Member] | ||
| Commitments and Contingencies (Details) [Line Items] | ||
| Purchase of additional units (in Shares) | 6,000,000 | |
| Underwriting Agreement [Member] | ||
| Commitments and Contingencies (Details) [Line Items] | ||
| Underwriter discount per unit (in Dollars per share) | $ 0.35 | |
| Underwriters deferred fee | $ 14,000,000 |
Class A Common Stock Subject to Possible Redemption (Details) - Schedule of common stock subject to possible redemption - USD ($) |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Mar. 08, 2021 |
Sep. 30, 2022 |
Mar. 31, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
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| Schedule Of Common Stock Subject To Possible Redemption Abstract | |||||
| Proceeds at issuance date (March 8, 2021) | $ 400,000,000 | ||||
| Less: | |||||
| Proceeds allocated to public warrants | $ (20,553,964) | ||||
| Class A common stock issuance cost | (21,440,443) | ||||
| Fair value overallotment option | (1,406,950) | ||||
| Add: | |||||
| Remeasurement of the carrying value to redemption value | 43,401,357 | ||||
| Class A common shares subject to redemption, December 31, 2021 | $ 400,000,000 | ||||
| Add: | |||||
| Remeasurement of the carrying value to redemption value | $ 1,421,296 | $ 43,401,357 | 1,421,296 | ||
| Class A common shares subject to redemption, September 30, 2022 | $ 401,421,296 | $ 401,421,296 | |||
Recurring Fair Value Measurements (Details) - USD ($) |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2022 |
Dec. 31, 2021 |
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| Recurring Fair Value Measurements (Details) [Line Items] | ||
| Trust account | $ 402,058,201 | $ 400,034,264 |
| Warrants liability | $ 1,379,967 | $ 26,645,622 |
| Overallotment option term | 45 days | |
| Unit price | $ 10 | |
| Risk free rate | 0.04% | |
| Volatility | 16.70% | |
| Public Warrants [Member] | ||
| Recurring Fair Value Measurements (Details) [Line Items] | ||
| Aggregate fair value of the public warrants | $ 20,553,963 | |
| Class A Common Stock [Member] | ||
| Recurring Fair Value Measurements (Details) [Line Items] | ||
| Public warrants (in Shares) | 13,333,333 | 13,333,333 |
| Class A shares per share (in Dollars per share) | $ 11.5 | $ 11.5 |
| Class B [Member] | ||
| Recurring Fair Value Measurements (Details) [Line Items] | ||
| Class A shares per share (in Dollars per share) | $ 1.5 | $ 1.5 |
| Private warrants (in Shares) | 7,500,000 | 7,500,000 |
Recurring Fair Value Measurements (Details) - Schedule of fair value measurements inputs - Business Combination [Member] - $ / shares |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2022 |
Dec. 31, 2021 |
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| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
| Risk-fee interest rate | 4.04% | 1.27% |
| Expected term (years) | 5 years 5 months 1 day | 5 years 1 month 20 days |
| Expected volatility | 6.90% | 19.80% |
| Exercise price (in Dollars per share) | $ 11.5 | $ 11.5 |
| Probability of completing a business combination | 6.90% | 99.00% |
| Dividend yield | 0.00% | 0.00% |