UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
FOR THE TRANSITION PERIOD FROM TO
Commission File Number:
(Exact name of registrant as specified in its Charter)
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incorporation or organization) |
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Identification No.) |
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(Address of principal executive offices) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 21, 2024, there were
Explanatory Note
Restatement and Revision
As previously reported by Gores Holdings IX, Inc. (the “Company”) in a Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on August 29, 2024, the Audit Committee (the “Audit Committee”) of the Board of Directors of the Company determined that the Company’s previously issued (i) financial statements as of and for the years ended December 31, 2023 and 2022 included in its Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 20, 2024 (the “Original Form 10-K”), (ii) unaudited financial statements for the quarters ended March 31, 2022 through September 30, 2023 included in its Quarterly Reports on Form 10-Q for the periods ended March 31, 2023, June 30, 2023, and September 30, 2023, and (iii) unaudited financial statements for the quarter ended March 31, 2024 included in its Quarterly Report on Form 10-Q for the period ended March 31, 2024 (the “Q1 2024 Form 10-Q”), should no longer be relied upon due to errors in such financial statements. The errors related primarily to the accounting of the Company’s tax provision.
As of the date of this report, the Company has filed with the SEC on November 13, 2024 an amendment to the Original Form 10-K (the “Form 10-K/A”) that includes financial statements that amended and restated the previously issued financial statements filed with the Original Form 10-K and the Quarterly Reports on Form 10-Q for the periods ended March 31, 2023, June 30, 2023 and September 30, 2023.
This quarterly report on Form 10-Q for the three and six months ended June 30, 2024 includes financial statements that amend and restate the Company’s unaudited financial statements as of and for the three months ended March 31, 2024 previously included in the Q1 2024 Form 10-Q. Please see Note 2 to the unaudited financial statements included in this Quarterly Report on Form 10-Q for a discussion of the restatement and the impact on the specific accounts in such unaudited financial statements. The Company will not otherwise amend the Q1 2024 Form 10-Q.
TABLE OF CONTENTS
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Item 1. |
Interim Financial Statements |
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Condensed Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023 |
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Unaudited Condensed Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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3
GORES HOLDINGS IX, INC.
CONDENSED BALANCE SHEETS
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June 30, 2024 |
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(unaudited) |
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December 31, 2023 |
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ASSETS |
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Current assets: |
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Cash |
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$ |
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$ |
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Prepaid expenses |
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Total current assets |
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Cash and investments held in Trust Account |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' DEFICIT |
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Current liabilities: |
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Accrued expenses |
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$ |
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$ |
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State franchise tax accrual |
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Income tax payable |
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Notes payable - related party |
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Total current liabilities |
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Public warrants derivative liability |
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Private warrants derivative liability |
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Deferred income tax payable |
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Deferred underwriting compensation |
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Total liabilities |
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Class A Common Stock subject to possible redemption, |
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Stockholders' deficit |
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Preferred stock, $ |
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— |
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Common stock |
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Class A Common Stock, $ |
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— |
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Class F Common Stock, $ |
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Additional paid-in capital |
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— |
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— |
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Accumulated deficit |
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Total stockholders' deficit |
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Total liabilities and stockholders' deficit |
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$ |
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$ |
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See accompanying notes to the unaudited, interim, condensed financial statements.
4
GORES HOLDINGS IX, INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
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Three |
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Three |
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Six |
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Six |
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Months Ended |
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Months Ended |
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Months Ended |
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Months Ended |
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June 30, 2024 |
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June 30, 2023 |
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June 30, 2024 |
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June 30, 2023 |
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Professional fees and other expenses |
$ |
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$ |
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$ |
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$ |
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State franchise taxes, other than income tax |
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( |
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( |
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Net loss from operations |
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( |
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Change in fair value of public and private warrant liabilities |
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Income from cash and investments held in Trust Account |
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Net income before provision for/(benefit from) income tax |
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Provision for income tax |
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Net income |
$ |
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$ |
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$ |
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$ |
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Net income/(loss) per common share: |
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Weighted average shares outstanding of Class A Common Stock |
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Net income/(loss) per share, Class A Common Stock (including accretion of temporary equity) |
$ |
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$ |
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$ |
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$ |
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Weighted average shares outstanding of Class F Common Stock |
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Net income/(loss) per share, Class F Common Stock (including accretion of temporary equity) |
$ |
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$ |
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$ |
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$ |
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See accompanying notes to the unaudited, interim, condensed financial statements.
5
GORES HOLDINGS IX, INC.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
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For the Three Months Ended June 30, 2024 |
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Class A Common Stock |
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Class F Common Stock |
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Additional |
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Accumulated |
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Stockholders' |
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Shares |
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Amount |
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Shares |
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Amount |
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Paid-In Capital |
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Deficit |
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Deficit |
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Balance at April 1, 2024 |
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- |
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$ |
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- |
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$ |
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$ |
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- |
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$ |
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$ |
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Net income |
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- |
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- |
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- |
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- |
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- |
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Increase in redemption value of Class A Common Stock subject to redemption |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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Balance at June 30, 2024 |
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- |
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$ |
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- |
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$ |
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$ |
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- |
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$ |
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$ |
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For the Six Months Ended June 30, 2024 |
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Class A Common Stock |
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Class F Common Stock |
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Additional |
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Accumulated |
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Stockholders' |
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Shares |
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Amount |
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Shares |
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Amount |
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Paid-In Capital |
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Deficit |
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Deficit |
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Balance at January 1, 2024 |
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- |
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$ |
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- |
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$ |
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$ |
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- |
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$ |
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$ |
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Net income |
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- |
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- |
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- |
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- |
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- |
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Increase in redemption value of Class A Common Stock subject to redemption |
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- |
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- |
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- |
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- |
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- |
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( |
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( |
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Balance at June 30, 2024 |
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- |
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$ |
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- |
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$ |
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$ |
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- |
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$ |
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( |
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$ |
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For the Three Months Ended June 30, 2023 |
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Class A Common Stock |
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Class F Common Stock |
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Additional |
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Accumulated |
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Stockholders' |
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Shares |
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Amount |
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Shares |
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Amount |
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Paid-In Capital |
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Deficit |
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Deficit |
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Balance at April 1, 2023 |
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- |
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$ |
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- |
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$ |
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$ |
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- |
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$ |
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( |
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$ |
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Net income |
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- |
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- |
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- |
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- |
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- |
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Increase in redemption value of Class A Common Stock subject to redemption |
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- |
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- |
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- |
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- |
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- |
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( |
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( |
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Balance at June 30, 2023 |
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- |
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$ |
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- |
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$ |
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$ |
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- |
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$ |
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( |
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$ |
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For the Six Months Ended June 30, 2023 |
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Class A Common Stock |
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Class F Common Stock |
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Additional |
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Accumulated |
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Stockholders' |
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Shares |
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Amount |
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Shares |
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Amount |
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Paid-In Capital |
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Deficit |
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Deficit |
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Balance at January 1, 2023 |
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- |
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$ |
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- |
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$ |
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$ |
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- |
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$ |
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( |
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$ |
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Net income |
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- |
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- |
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- |
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- |
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- |
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Increase in redemption value of Class A Common Stock subject to redemption |
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- |
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- |
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- |
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- |
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- |
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( |
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( |
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Balance at June 30, 2023 |
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- |
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$ |
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- |
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$ |
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$ |
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- |
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$ |
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( |
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$ |
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( |
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See accompanying notes to the unaudited, interim, condensed financial statements.
6
GORES HOLDINGS IX, INC.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
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Six Months Ended June 30, 2024 |
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Six Months Ended June 30, 2023 |
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Cash flows from operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash used in operating activities: |
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Income from cash and investments held in Trust Account |
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( |
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( |
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Gain from change in fair value of private and public warrant liabilities |
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( |
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( |
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Changes in operating assets and liabilities: |
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State franchise tax accrual |
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( |
) |
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( |
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Income tax payable |
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( |
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Deferred income tax |
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( |
) |
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( |
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Prepaid assets |
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( |
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Accrued expenses, formation and offering costs |
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Net cash used in operating activities |
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( |
) |
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( |
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Cash flows from investing activities: |
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Shareholder redemption |
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( |
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— |
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Cash withdrawn from Trust Account for tax and regulatory expenses |
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Net cash provided by/(used in) investing activities |
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( |
) |
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|
Cash flows from financing activities: |
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|
|
|
|
|
|
||
Redemption of Units at extension |
|
|
|
|
|
|
|
— |
|
|
Proceeds from notes payable – related party |
|
|
|
|
|
|
|
— |
|
|
Net cash provided by financing activities |
|
|
|
|
|
|
|
— |
|
|
Net change in cash |
|
|
|
( |
) |
|
|
|
( |
) |
Cash at beginning of period |
|
|
|
|
|
|
|
|
||
Cash at end of period |
|
$ |
|
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
|
||
Supplemental disclosure of income and franchise taxes paid: |
|
|
|
|
|
|
|
|
||
Cash paid for income and state franchise taxes |
|
$ |
|
|
|
$ |
|
|
||
See accompanying notes to the unaudited, interim, condensed financial statements.
7
GORES HOLDINGS IX, INC.
NOTES TO THE UNAUDITED, INTERIM, CONDENSED FINANCIAL STATEMENTS
1. Organization and Business Operations
Organization and General
Gores Holdings IX, Inc. (the “Company”) was incorporated in Delaware on
At June 30, 2024, the Company had not commenced any operations. All activity for the period from July 8, 2021, the date on which operations commenced, through June 30, 2024 relates to the Company’s formation and initial public offering (“Public Offering”) described below and subsequently to the Company's search for a prospective initial Business Combination. The Company subsequently completed the Public Offering on January 14, 2022 (the “IPO Closing Date”). The Company will not generate any operating revenues until after the completion of its Business Combination, at the earliest. Subsequent to the Public Offering, the Company generates non-operating income in the form of interest and/or dividend income from the proceeds derived from the Public Offering and the sale of the Private Placement Warrants (as defined below) held in the Trust Account (as defined below).
Extension
At the special meeting of stockholders of the Company held on January 9, 2024 (the “Special Meeting”), stockholders of the Company approved a proposal to amend and restate the Company’s amended and restated certificate of incorporation (the “Extension Amendment”) to extend the date by which the Company must consummate a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses from January 14, 2024 to December 6, 2024 (or such earlier date as determined by the Company’s board of directors).
The Company filed the Extension Amendment with the Secretary of State of Delaware on January 9, 2024. The foregoing description of the Extension Amendment does not purport to be complete and is qualified in its entirety by reference to Exhibit 3.1 which is incorporated herein by reference.
In connection with the vote to approve the proposal to adopt the Extension Amendment at the Special Meeting, holders of
Financing
Upon the IPO Closing Date and the sale of the Private Placement Warrants, an aggregate of $
The Company intends to finance a Business Combination with the net proceeds from its $
8
Trust Account
Funds held in the Trust Account can be invested only in U.S. government treasury bills with a maturity of one hundred and eighty-five (185) days or less or in money market funds meeting certain conditions under Rule 2a‑7 under the Investment Company Act of 1940 (the “Investment Company Act”), as amended, that invest only in direct U.S. government obligations. As of June 30, 2024, the Trust Account consisted of cash.
The Company’s second amended and restated certificate of incorporation provides that, other than the withdrawal of interest to fund regulatory compliance requirements and other costs related thereto (a “Regulatory Withdrawal”) by December 6, 2024 (or such earlier date as determined by the Company's board of directors) and/or additional amounts necessary to pay franchise and income taxes, if any, none of the funds held in trust will be released until the earliest of (i) the completion of the Business Combination; or (ii) the redemption of any public shares of common stock properly tendered in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation to modify the substance or timing of the Company’s obligation to redeem
To mitigate the risk of the Company being deemed to have been operating as an unregistered investment company (including under the subjective test of Section 3(a)(1)(A) of the Investment Company Act of 1940, as amended), the Company has instructed the trustee with respect to the Trust Account to liquidate the U.S. government securities or money market funds held in the Trust Account and thereafter to hold all funds in the Trust Account in cash (which may include demand deposit accounts) until the earlier of consummation of a business combination or liquidation. As a result, following such liquidation, the Company may receive minimal interest, if any, on the funds held in the Trust Account, which would reduce the dollar amount the Company’s public stockholders would receive upon any redemption or liquidation of the Company.
Business Combination
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Public Offering, although substantially all of the net proceeds of the Public Offering are intended to be generally applied toward consummating a Business Combination. The Business Combination must be with one or more target businesses that together have an aggregate fair market value of at least
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 business days prior to the consummation of the Business Combination, including interest income 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 business days prior to the consummation of the Business Combination, including interest income 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 law or under Nasdaq 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. Currently, the Company will not redeem its public shares of common stock in an amount that would cause its net tangible assets to be less than $
9
Company would not proceed with the redemption of its public shares of common stock and the related Business Combination, and instead may search for an alternate Business Combination.
As a result of the foregoing redemption provisions, the public shares of common stock will be recorded at redemption amount and classified as temporary equity in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”), in subsequent periods.
The Company has until December 6, 2024 (or such earlier date as determined by the Company's board of directors) from the IPO Closing Date to complete its 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 business days thereafter, redeem the public shares of common stock for a per share pro rata portion of the Trust Account, including interest income, but less taxes payable (less up to $
In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per Unit in the Public Offering.
Emerging Growth Company
Section 102(b)(1) of the Jumpstart Our Business Startup (“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 Securities Exchange Act of 1934, as amended (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.
2. Restatement of Previously Issued Financial Statements
The Company previously considered dividends earned in the Trust Account as eligible for the dividend received deduction per Internal Revenue Code §243 when filing tax returns for the tax years ended December 31, 2023 and 2022, and in calculating the tax provision for the three months ended March 31, 2024. Upon further scrutiny, the Company has determined those dividends are not eligible for the deduction and has amended those returns as a result. On November 13, 2024, the Company filed a Restated From 10-K/A for the Year Ended December 31, 2023 and for the periods ended March 31 2023, June 30, 2023, and September 30, 2023, all of which were impacted by this error. The Company has also determined the financial statements issued for the three months ended March 31, 2024 should be restated due to this material error, and shall be restated herein.
10
The following table summarizes the effect of the restatement on each unaudited financial statement line item impacted by this error as of the dates indicated compared to the Original Report financial statements for the quarter ended March 31, 2024:
|
March 31, 2024 (unaudited) |
|
|||||||||||||
|
|
|
As Previously |
|
|
|
|
|
|
|
|
|
|||
|
|
|
Reported |
|
|
|
Adjustments |
|
|
|
As Restated |
|
|||
Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Income tax payable |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|||
Total current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Deferred income tax payable |
|
|
|
|
|
|
|
( |
) |
|
|
|
( |
) |
|
Total liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Class A Common Stock subject to possible redemption |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
||
Accumulated deficit |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
Total stockholders' deficit |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
Statement of Operations (Three Months Ended March 31, 2024) |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Provision for income tax |
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
||
Net loss |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
Net loss per share, Class A Common Stock |
|
|
|
( |
) |
|
|
|
|
|
|
|
( |
) |
|
Net loss per share, Class F Common Stock |
|
|
|
( |
) |
|
|
|
|
|
|
|
( |
) |
|
Statement of Changes in Stockholders' Deficit (Three Months Ended March 31, 2024) |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Net loss |
|
$ |
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
Increase in redemption value of Class A Common Stock subject to redemption |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
Statement of Cash Flows (Three Months Ended March 31, 2024) |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Net loss |
|
$ |
|
( |
) |
|
$ |
|
( |
) |
|
$ |
|
( |
) |
Income tax payable |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Deferred income tax |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
3. Significant Accounting Policies
Basis of Presentation
Net Income/(Loss) Per Common Share
The Company has two classes of shares, which are referred to as Class A Common Stock (the “Common Stock”) and Class F Common Stock (the “Founder Shares”). The Company's Class A Common Stock is subject to SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The accretion or remeasurement is treated as a deemed dividend (i.e., a reduction to retained earnings, or in absence of retained earnings, additional paid-in capital). The Company has recognized these changes, resulting in a net income/(loss) per common share. Income and losses are shared pro rata between the two classes of shares, which assumes a business combination as the most likely outcome. Net income/(loss) per common share is calculated by dividing the net income/(loss) by the weighted average shares of common stock outstanding for the respective period. At June 30, 2024 and December 31, 2023, the Company did not have any dilutive securities or other contracts that could, potentially, be exercised or converted
11
into common stock and then share in the earnings of the Company under the treasury stock method. As a result, diluted net income/(loss) per common share is the same as basic net income/(loss) per common share for the periods presented.
|
|
For the Three Months Ended June 30, 2024 |
|
|
For the Three Months Ended June 30, 2023 |
|
|
For the Six Months Ended June 30, 2024 |
|
|
For the Six Months Ended June 30, 2023 |
|
||||||||||||||||||||||||||||
|
|
Class A |
|
|
Class F |
|
|
Class A |
|
|
Class F |
|
|
Class A |
|
|
Class F |
|
|
Class A |
|
|
Class F |
|
||||||||||||||||
Basic and diluted net income/(loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
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|
||||||||
Numerator: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Allocation of net income/(loss) including accretion of temporary equity |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
( |
) |
||||||
|
|
|
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|
||||||||
Denominator: |
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Basic and diluted net income/(loss) per common share |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
( |
) |
||||||
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution as well as the Trust Account, which throughout the year regularly exceed the Federal Deposit Insurance Corporation coverage limit of $
Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”), approximates the carrying amounts represented in the condensed balance sheets, primarily due to their short-term nature (except for the derivative warrant liabilities, see Note 8).
Fair Value Measurement
ASC 820 establishes a fair value hierarchy that prioritizes and ranks the level of observability of inputs used to measure investments at fair value. The observability of inputs is impacted by a number of factors, including the type of investment, characteristics specific to the investment, market conditions and other factors. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level I measurements) and the lowest priority to unobservable inputs (Level III measurements).
Investments with readily available quoted prices or for which fair value can be measured from quoted prices in active markets will typically have a higher degree of input observability and a lesser degree of judgment applied in determining fair value.
12
The three levels of the fair value hierarchy under ASC 820 are as follows:
Level I—Quoted prices (unadjusted) in active markets for identical investments at the measurement date are used.
Level II—Pricing inputs are other than quoted prices included within Level I that are observable for the investment, either directly or indirectly. Level II pricing inputs include quoted prices for similar investments in active markets, quoted prices for identical or similar investments in markets that are not active, inputs other than quoted prices that are observable for the investment, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level III—Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. The inputs used in determination of fair value require significant judgment and estimation.
In some cases, the inputs used to measure fair value might fall within different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the investment is categorized in its entirety is determined based on the lowest level input that is significant to the investment. Assessing the significance of a particular input to the valuation of an investment in its entirety requires judgment and considers factors specific to the investment. The categorization of an investment within the hierarchy is based upon the pricing transparency of the investment and does not necessarily correspond to the perceived risk of that investment.
Derivative Liabilities
The Company evaluated the Warrants (as defined below in Note 4 – Public Offering) and Private Placement Warrants (as defined below in Note 5 – Related Party Transactions) (collectively, “Warrant Securities”) in accordance with ASC 815-40, "Derivatives and Hedging - Contracts in Entity's Own Equity," and concluded that the Warrant Securities could not be accounted for as components of equity. As the Warrant Securities meet the definition of a derivative in accordance with ASC 815, the Warrant Securities are recorded as derivative liabilities on the condensed Balance Sheets and measured at fair value at inception (the Close Date) and remeasured at each reporting date in accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the condensed Statements of Operations in the period of change.
Offering Costs
The Company complies with the requirements of FASB ASC Topic 340-10-S99-1, “Other Assets and Deferred Costs – SEC Materials” (“ASC 340-10-S99”), and SEC Staff Accounting Bulletin (SAB) Topic 5A, “Expenses of Offering”. Offering costs were $
Redeemable Common Stock
As discussed in Note 4, all of the
13
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security. Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount value. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated deficit.
In connection with the vote to approve the proposal to adopt the Extension Amendment at the Special Meeting, holders of
Use of Estimates
The preparation of unaudited, interim, condensed financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited, interim, condensed financial statements and the reported amounts of revenues and expenses during the reporting period. One of the more significant accounting estimates included in these unaudited, interim, condensed financial statements is the determination of the fair value of the warrant liability. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
For those liabilities or benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax liabilities as income tax expense.