NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note
1—Description of Organization, Business Operations and Basis of Presentation
CF
Acquisition Corp. V (the “Company”) was incorporated in Delaware on January 23, 2020. The Company was formed for the purpose
of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with
one or more businesses (the “Business Combination”).
Although
the Company is not limited in its search for target businesses to a particular industry or sector for the purpose of consummating a Business
Combination, the Company intends to focus its search on companies operating in the financial services, healthcare, real estate services,
technology and software industries. The Company is an early stage and emerging growth company and, as such, the Company is subject to
all of the risks associated with early stage and emerging growth companies.
As
of September 30, 2021, the Company had not commenced operations. All activity through September 30, 2021 relates to the Company’s
formation and the initial public offering (the “Initial Public Offering”) described below, and all activity since the Initial
Public Offering, relates to the Company’s efforts toward locating and completing a suitable Business Combination. The Company will
not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company has
generated non-operating income in the form of interest income on investments in money market funds that invest in U.S. Treasury Securities
and cash equivalents from the proceeds derived from the Initial Public Offering, and recognized changes in the fair value of warrant
liability and FPS (as defined below) liability as other income (expense).
The
Company’s sponsor is CFAC Holdings V, LLC (the “Sponsor”). The registration statement for the Initial Public Offering
was declared effective by the U.S. Securities and Exchange Commission (“SEC”) on January 28, 2021. On February 2, 2021, the
Company consummated the Initial Public Offering of 25,000,000 units (each, a “Unit” and with respect to the shares of Class
A common stock included in the Units sold, the “Public Shares”), at a purchase price of $10.00 per Unit, generating gross
proceeds of $250,000,000, as described in Note 3. Each Unit consists of one share of Class A common stock and one-third of one redeemable
warrant. Each whole warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50. Each warrant will
become exercisable on the later of 30 days after the completion of the Business Combination or 12 months from the closing of the Initial
Public Offering and will expire 5 years after the completion of the Business Combination, or earlier upon redemption or liquidation.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of 600,000 units (the “Private Placement Units”)
at a price of $10.00 per Private Placement Unit to the Sponsor in a private placement, generating gross proceeds of $6,000,000, which
is described in Note 4. The proceeds of the Private Placement Units were deposited into the Trust Account (as defined below) and will
be used to fund the redemption of the Public Shares subject to the requirements of applicable law (see Note 4).
Offering
costs amounted to approximately $5,500,000, consisting of $5,100,000 of underwriting fees and approximately $400,000 of other costs.
Following
the closing of the Initial Public Offering and sale of Private Placement Units on February 2, 2021, an amount of $250,000,000 ($10.00
per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Units (see
Note 4) was placed in a trust account (“Trust Account”) located in the United States at UMB Bank, N.A., with Continental
Stock Transfer & Trust Company acting as trustee, which may be invested only in U.S. government securities, within the meaning
set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (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 selected by the Company meeting
the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by the Company, until
the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account, as described below.
Initial
Business Combination — The Company’s management has broad discretion with respect to the specific application of the
net proceeds of the Initial Public Offering and the sale of Private Placement Units, although substantially all of the net proceeds are
intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete
a Business Combination successfully. The Company must complete one or more initial Business Combinations having an aggregate fair market
value of at least 80% of the assets held in the Trust Account (excluding taxes payable on income earned on the Trust Account) at the
time of the agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination
if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires
a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company
Act.
The
Company will provide the holders of the Public Shares (the “public stockholders”) with the opportunity to redeem all or a
portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called
to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder
approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders
will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially $10.00 per Public
Share). The per share amount to be distributed to public stockholders who redeem the Public Shares will not be reduced by the Marketing
Fee (as defined below in Note 4). There will be no redemption rights upon the completion of a Business Combination with respect to the
Company’s warrants. The Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001
either immediately prior to or upon such consummation of a Business Combination and a majority of the shares voted are voted in favor
of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote
for business or other legal reasons, the Company will, pursuant to its amended and restated certificate of incorporation (as may be amended,
the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the
SEC and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the
Business Combination is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company
will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer
rules. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against
the proposed Business Combination. If the Company seeks stockholder approval in connection with a Business Combination, the initial stockholders
(as defined below) have agreed to vote their Founder Shares (as defined below in Note 4), their shares underlying the Private Placement
Units and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. In addition, the
initial stockholders have agreed to waive their redemption rights with respect to their Founder Shares and any Public Shares held by
the initial stockholders in connection with the completion of a Business Combination.
Notwithstanding
the foregoing, the Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate
of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under
Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), will be restricted from redeeming its
shares with respect to more than an aggregate of 15% or more of the Class A common stock sold in the Initial Public Offering, without
the prior consent of the Company.
The
Sponsor and the Company’s officers and directors (the “initial stockholders”) have agreed not to propose an amendment
to the Amended and Restated Certificate of Incorporation (i) that would affect the substance or timing of the Company’s obligation
to allow redemption in connection with its Business Combination or to redeem 100% of the Public Shares if the Company does not complete
a Business Combination or (ii) with respect to any other provision relating to stockholders’ rights or pre-business combination
activity, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares in conjunction with
any such amendment.
On
July 5, 2021, the Company entered into an Agreement and Plan of Merger (as it may be amended, supplemented or otherwise modified from
time to time, the “Merger Agreement”) by and among (i) Satellogic Inc., a business company with limited liability incorporated
under the laws of the British Virgin Islands and a direct wholly owned subsidiary of Satellogic (“PubCo”), (ii) Ganymede
Merger Sub 1 Inc., a business company with limited liability incorporated under the laws of the British Virgin Islands and a direct wholly
owned subsidiary of PubCo (“Merger Sub 1”), (iii) Ganymede Merger Sub 2 Inc., a Delaware corporation and a direct wholly
owned subsidiary of PubCo (“Merger Sub 2”), and (iv) Nettar Group Inc. (d/b/a Satellogic), a business company with limited
liability incorporated under the laws of the British Virgin Islands (“Satellogic”). Pursuant to the Merger Agreement, subject
to the terms and conditions set forth therein, (a) Merger Sub 1 will merge with and into Satellogic (the “Initial Merger”)
whereby the separate existence of Merger Sub 1 will cease and Satellogic will be the surviving corporation of the Initial Merger and
become a wholly owned subsidiary of PubCo, and (b) following confirmation of the effective filing of the Initial Merger, Merger Sub 2
will merge with and into the Company (the “SPAC Merger” and together with the Initial Merger, the “Mergers”),
the separate existence of Merger Sub 2 will cease and the Company will be the surviving corporation of the SPAC Merger and a direct wholly
owned subsidiary of PubCo.
The
board of directors of each of Satellogic and the Company have unanimously approved the Mergers and the other transactions contemplated
by the Merger Agreement (collectively, the “Transactions”). The closing of the Transactions will require the approval
of the stockholders of the Company and the shareholders of Satellogic, and is subject to other customary closing conditions, including
the receipt of certain regulatory approvals.
Certain existing agreements of the Company, included
but not limited to the FPA, have been or will be amended or amended and restated in connection with the Transactions. For more information
related to the Transactions, reference should be made to the Form 8-K that was filed by the Company with the SEC on July 6, 2021, PubCo’s
Registration Statement on Form F-4 initially filed with the SEC on August 12, 2021 and as amended on September 24, 2021, October 19, 2021,
November 5, 2021 and November 10, 2021, which was declared effective by the SEC on November 12, 2021 (the “Form F-4”) and
the Company’s definitive proxy statement filed with the SEC on November 12, 2021 (the “Proxy Statement”).
Forward
Purchase Contract — In connection with the Initial Public Offering, the Sponsor committed, pursuant to a forward purchase contract
with the Company (the “FPA”), to purchase, in a private placement for gross proceeds of $10,000,000 to occur concurrently
with the consummation of an initial Business Combination, 1,000,000 of the Company’s Units on substantially the same terms as the
sale of Units in the Initial Public Offering at $10.00 per Unit, and 250,000 shares of Class A common stock (for no additional consideration)
(the securities issuable pursuant to the FPA, the “FPS”). The funds from the sale of the FPS will be used as part of the
consideration to the sellers in the initial Business Combination; any excess funds from this private placement will be used for working
capital in the post-transaction company. This commitment is independent of the percentage of stockholders electing to redeem their Public
Shares and provides the Company with a minimum funding level for the initial Business Combination. The FPA was amended and restated on
July 5, 2021 in connection with the Company’s entry into the Merger Agreement, as further described in the Company’s Form
8-K filed with the SEC on July 6, 2021.
Failure
to Consummate a Business Combination — The Company has until February 2, 2023 to consummate a Business Combination, or a later
date approved by the Company’s stockholders in accordance with the Amended and Restated Certificate of Incorporation (the “Combination
Period”). If the Company is unable to complete a Business Combination by the end of the Combination Period, the Company will (i)
cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days
thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust
Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay taxes (less
up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will
completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions,
if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of
the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in the case of
clauses (ii) and (iii), to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements
of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants,
which will expire worthless if the Company fails to complete a Business Combination within the Combination Period. The Company entered
into the Merger Agreement on July 5, 2021 and if the Transactions are consummated, such Transactions would be a Business Combination.
The Company anticipates that the Transactions will close prior to the end of the Consummation Period. For more information regarding
the Transactions, reference is made to the Company’s Form 8-K filed with the SEC on July 6, 2021, the Form F-4 and the Proxy Statement.
The
initial stockholders have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete
a Business Combination within the Combination Period. However, if the initial stockholders acquire Public Shares in or after the Initial
Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the
Company fails to complete a Business Combination within the Combination Period. 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 $10.00
per share initially held in the Trust Account. In order to protect the amounts held in the Trust Account, the Sponsor has agreed to 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.
This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim
of any kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriters of
the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities
Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not
be responsible to the extent of any liability for such third party claims. The Company will seek to reduce the possibility that the Sponsor
will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective
target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title,
interest or claim of any kind in or to monies held in the Trust Account, except for the Company’s independent registered public
accounting firm.
Liquidity
and Capital Resources
As
of both September 30, 2021 and December 31, 2020, the Company had $25,000 of cash in its operating account. As of September 30, 2021
and December 31, 2020, the Company had a working capital deficit of $3,021,894 and $107,200, respectively. During the three months and
nine months ended September 30, 2021, $6,302 and $14,385 of the interest income earned on funds held in the Trust Account, respectively,
was available to pay taxes.
The
Company’s liquidity needs through September 30, 2021 have been satisfied through a contribution of $25,000 from the Sponsor in
exchange for the issuance of the Founder Shares, a loan of $148,445 from the Sponsor pursuant to a promissory note (the “Pre-IPO
Note”) (see Note 4), the proceeds from the sale of the Private Placement Units not held in the Trust Account, and the Sponsor Loan
(as defined below). The Company fully repaid the Pre-IPO Note upon completion of the Initial Public Offering. In addition, in order to
finance transaction costs in connection with a Business Combination, the Sponsor has committed up to $1,750,000 to be provided to the
Company to fund the Company’s expenses relating to investigating and selecting a target business and other working capital requirements
after the Initial Public Offering and prior to the Company’s initial Business Combination (the “Sponsor Loan”). If
the Sponsor Loan is insufficient, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors
may, but are not obligated to, provide the Company with Working Capital Loans (as defined in Note 4). As of September 30, 2021 and December
31, 2020, there was $1,197,223 and $0 outstanding, respectively, under the Sponsor Loan.
Based
on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity from the Sponsor or
an affiliate of the Sponsor, or certain of the Company’s officers and directors, to meet its needs through the earlier of the consummation
of a Business Combination or one year from this filing. Over this time period, the Company will be using these funds for paying existing
accounts payable, identifying and evaluating prospective target businesses, performing due diligence on prospective target businesses,
paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating
the Business Combination.
Basis
of Presentation
The
unaudited condensed financial statements are presented in accordance with accounting principles generally accepted in the United States
of America (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC and reflect all adjustments, consisting only
of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position
as of September 30, 2021 and the results of operations and cash flows for the periods presented. Certain information and disclosures
normally included in unaudited condensed financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such
rules and regulations. Interim results are not necessarily indicative of results for a full year. The accompanying unaudited condensed
financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Form 8-K and
the final prospectus filed by the Company with the SEC on February 8, 2021 and January 29, 2021, respectively.
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart
Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not
being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure
obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding
a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial
accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective
or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with
the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected
not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application
dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time
private companies adopt the new or revised standard.
This
may make comparison of the Company’s unaudited condensed financial statements with another public company that is neither an emerging
growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because
of the potential differences in accounting standards used.
Revisions
of Previously Issued Financial Statements
In
connection with the preparation of the Company’s financial statements for the quarter ended September 30, 2021, the Company re-evaluated
its accounting of the Public Shares. As a result, the Company determined that at the closing of the Initial Public Offering, it had improperly
valued the Public Shares. The Company has previously determined the Public Shares subject to possible redemption to be equal to the redemption
value of $10.00 per share, while also taking into consideration a redemption cannot result in net tangible assets being less than $5,000,001.
Pursuant to the updated analysis, management determined that all Public Shares can be redeemed or become redeemable subject to the occurrence
of future events considered outside the Company’s control. Therefore, management concluded that the redemption value should include
all Public Shares subject to possible redemption, resulting in the shares of Class A common stock subject to possible redemption being
equal to their redemption value, and reclassified the remaining Public Shares from permanent equity to temporary equity on the Company’s
condensed balance sheets.
The
Company assessed the materiality of these revisions on its prior periods’ financial statements in accordance with SEC Staff Accounting
Bulletins Topic 1.M, Materiality and Topic 1.A, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements
in Current Year Financial Statements and the guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 250, Accounting Changes and Error Corrections, and concluded that the revisions were not material
to the Company’s financial statements for prior interim periods. There were no revisions to the prior annual period. Accordingly,
the Company has concluded that an amendment of its previously filed periodic reports is not required. Therefore, the Company has revised
the historical periods in this Quarterly Report on Form 10-Q, and the historical interim periods that will be presented in the Company’s
prospective filings will be revised accordingly.
As
a result, the Company also revised its condensed statements of stockholders’ equity to classify all Public Shares as temporary
equity and to record accretion on the Public Shares as a $5.8 million decrease in Additional paid-in capital and a $9.9 million increase
in Accumulated deficit during the period ended March 31, 2021.
In
connection with the change in presentation for the shares of Class A common stock subject to redemption, the Company also revised its
earnings per share calculation to allocate net income (loss) evenly to shares of Class A common stock subject to possible redemption,
non-redeemable shares of Class A common stock and shares of Class B common stock. This presentation contemplates a Business Combination
as the most likely outcome, in which case, all classes of common stock share pro-rata in the net income (loss) of the Company.
There
has been no change in the Company’s total assets, liabilities, or operating results for all periods presented. There has been
no change in the Company’s cash flows other than the supplemental noncash disclosure of changes in shares of Class A common stock
subject to possible redemption.
Note
2—Summary of Significant Accounting Policies
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 revenues and expenses during the reporting period. Making estimates requires management to exercise
significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances
that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near
term due to one or more future confirming events. One of the more significant accounting estimates included in these financial statements
is the determination of the fair value of the warrant liability and FPS liability. Such estimates may be subject to change as more current
information becomes available and, therefore, 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 no cash equivalents in its operating account as of September 30, 2021 and December 31, 2020. The Company’s investments
held in the Trust Account as of September 30, 2021 was comprised of cash equivalents.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution,
which, at times, may exceed the Federal Deposit Insurance Corporation maximum coverage limit of $250,000, and cash equivalents held in
the Trust Account. For the three and nine months ended September 30, 2021 and for the three months ended September 30, 2020 and for the
period from January 23, 2020 (inception) through September 30, 2020, the Company has not experienced losses on these accounts and management
believes the Company is not exposed to significant risks on such accounts.
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, Fair Value Measurement,
approximates the carrying amounts represented in the balance sheets, primarily due to their short-term nature, with the exception of
the warrant and FPS liabilities.
Offering
Costs Associated with the Initial Public Offering
Offering
costs consisted of legal, accounting, and other costs incurred in connection with the preparation for the Initial Public Offering. These
costs, together with the underwriting discount, were charged to stockholders’ equity upon the completion of the Initial Public
Offering.
Warrant
and FPS Liability
The
Company accounts for the Warrants and FPS as either equity-classified or liability-classified instruments based on an assessment of the
specific terms of the Warrants and FPS using applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity
(“ASC 480”) and ASC 815, Derivatives and Hedging. The assessment considers whether the Warrants and FPS are freestanding
financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for
equity classification under ASC 815, including whether the Warrants and FPS are indexed to the Company’s own common shares and
whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s
control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted
at the time of issuance of the Warrants and execution of the FPA and as of each subsequent quarterly period-end date while the Warrants
and FPS are outstanding. For issued or modified warrants and for instruments to be issued pursuant to the FPA that meet all of the criteria
for equity classification, such warrants and instruments are required to be recorded as a component of additional paid-in capital at
the time of issuance. For issued or modified warrants and for the FPA instruments that do not meet all the criteria for equity classification,
such warrants and instruments are required to be recorded at their initial fair value on the date of issuance, and on each balance sheet
date thereafter. Changes in the estimated fair value of liability-classified Warrants and the FPS are recognized on the statements of
operations in the period of the change.
The
Company accounts for the Warrants and FPS in accordance with guidance in ASC 815-40, Derivatives and Hedging - Contracts in Entity’s
Own Equity (“ASC 815-40”), pursuant to which the Warrants and FPS do not meet the criteria for equity classification
and must be recorded as liabilities. See Note 7 for further discussion of the pertinent terms of the Warrants and Note 8 for further
discussion of the methodology used to determine the fair value of the Warrants and FPS.
Class A
Common Stock Subject to Possible Redemption
The
Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC 480. Shares of Class
A common stock subject to mandatory redemption (if any) are classified as liability instruments and measured at fair value. Shares of
conditionally redeemable Class A common stock (including shares of Class A common stock that feature redemption rights that are either
within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s
control) are classified as temporary equity. At all other times, shares of Class A common stock are classified as stockholders’
equity. As discussed in Note 1, all of the Public Shares feature certain redemption rights that are considered to be outside of the Company’s
control and subject to the occurrence of uncertain future events. Accordingly, as of September 30, 2021 and December 31, 2020, 25,000,000
and 0 shares of Class A common stock subject to possible redemption, respectively, are presented as temporary equity outside of the stockholders’
equity section of the Company’s balance sheet. The Company recognizes any subsequent changes in redemption value immediately as
they occur and adjusts the carrying value of redeemable Class A common stock to the redemption value at the end of each reporting period.
Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption
amount value of redeemable Class A common stock. The change in the carrying value of redeemable Class A common stock also resulted in
charges against Additional paid-in capital and Accumulated deficit.
Income
Taxes
Income
taxes are accounted for under ASC 740, Income Taxes (“ASC 740”), using the asset and liability method. Deferred tax
assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the unaudited condensed
financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. To the extent that it is more likely than not that deferred tax assets will not be recognized,
a valuation allowance would be established to offset their benefit.
ASC
740 prescribes a recognition threshold that a tax position is required to meet before being recognized in the unaudited condensed financial
statements. The Company provides for uncertain tax positions, based upon management’s assessment of whether a tax benefit is more
likely than not to be sustained upon examination by tax authorities. The Company recognizes interest and penalties related to unrecognized
tax benefits as provision for income taxes on the statement of operations.
Net
Income (Loss) Per Share of Common Stock
The
Company complies with accounting and disclosure requirements of ASC 260, Earnings Per Share. Net income (loss) per share of common
stock is computed by dividing net income (loss) applicable to stockholders by the weighted average number of shares of common stock outstanding
for the applicable periods. The Company applies the two-class method in calculating earnings per share. Accretion associated with the
redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
The
Company has not considered the effect of the warrants to purchase an aggregate of 8,533,333 shares of Class A common stock sold in the
Initial Public Offering and Private Placement in the calculation of diluted earnings per share, since their inclusion would be anti-dilutive
under the treasury stock method. As a result, diluted earnings per share of common stock is the same as basic earnings per share of common
stock for the periods presented.
The
following tables reflect the calculation of basic and diluted net income (loss) per share of common stock:
|
|
For the
Three Months Ended
September 30,
2021
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For the
Three Months Ended
September 20,
2020
|
|
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For the
Nine Months Ended
September 30,
2021
|
|
|
For the
Period from
January 23, 2020
(Inception) through
September 30,
2020
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|
Class A – Public
shares
|
|
|
Class A – Private placement shares and Class B – Common stock
|
|
|
Class A – Public
shares
|
|
|
Class A – Private placement shares and Class B – Common stock
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|
|
Class A – Public
shares
|
|
|
Class A – Private placement shares and Class B – Common stock
|
|
|
Class A – Public
shares
|
|
|
Class A – Private placement
shares and Class B – Common stock
|
|
Basic and diluted net loss per share of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of net loss
|
|
$
|
(949,538
|
)
|
|
$
|
(260,173
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(2,542,637
|
)
|
|
$
|
(781,085
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average number of shares of common stock outstanding
|
|
|
25,000,000
|
|
|
|
6,850,000
|
|
|
|
-
|
|
|
|
6,250,000
|
|
|
|
22,069,597
|
|
|
|
6,779,670
|
|
|
|
-
|
|
|
|
6,250,000
|
|
Basic and diluted net loss per share of common stock
|
|
$
|
(0.04
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(0.12
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
Recent
Accounting Pronouncements
In
August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an
Entity’s Own Equity. The standard is expected to reduce complexity and improve comparability of financial reporting associated
with accounting for convertible instruments and contracts in an entity’s own equity. The ASU also enhances information transparency
by making targeted improvements to the related disclosures guidance. Additionally, the amendments affect the diluted EPS calculation
for instruments that may be settled in cash or shares and for convertible instruments. The new standard will become effective for the
Company beginning January 1, 2024, can be applied using either a modified retrospective or a fully retrospective method of transition
and early adoption is permitted. Management is currently evaluating the impact of the new standard on the Company’s unaudited condensed
financial statements.
Management
does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a
material effect on the Company’s unaudited condensed financial statements.
Note
3—Initial Public Offering
Pursuant
to the Initial Public Offering, the Company sold 25,000,000 Units at a price of $10.00 per Unit. Each Unit consists of one share of Class A
common stock, and one-third of one redeemable warrant (each, a “Public Warrant”). Each whole Public Warrant entitles the
holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 6). No fractional
warrants will be issued upon separation of the Units and only whole warrants will trade. On February 2, 2021, the Sponsor forfeited 937,500
shares of Class B common stock due to the underwriter not exercising the overallotment option, such that the initial stockholders would
collectively own 20% of the Company’s issued and outstanding shares of common stock after the Initial Public Offering (not including
the shares of Class A common stock underlying the Private Placement Units).
Note
4—Related Party Transactions
Founder
Shares
On
January 23, 2020, the Sponsor purchased 11,500,000 shares (the “Founder Shares”) of the Company’s Class B common stock,
par value $0.0001 (“Class B common stock”) for an aggregate price of $25,000. On October 1, 2020, the Company effected a
1.25-for-1 stock split. In December 2020 and January 2021, the Sponsor returned to the Company, at no cost, an aggregate of 7,187,500
Founder Shares, which the Company cancelled. All share and per share amounts have been retroactively restated. On February 2, 2021, the
Sponsor forfeited 937,500 shares of Class B common stock, due to the underwriter not exercising the overallotment option, such that the
initial stockholders would collectively own 20% of the Company’s issued and outstanding shares of common stock after the Initial
Public Offering (not including the shares of Class A common stock underlying the Private Placement Units), resulting in an aggregate
of 6,250,000 Founder Shares outstanding and held by the Sponsor and independent directors of the Company. The Founder Shares will automatically
convert into shares of Class A common stock at the time of the consummation of the Business Combination and are subject to certain transfer
restrictions.
The
initial stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of its Founder Shares until the
earlier to occur of: (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business
Combination, (x) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock
splits, stock dividends, reorganizations, recapitalizations and the like) for any 20-trading days within any 30-trading day period commencing
at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital
stock exchange or other similar transaction 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.
Private
Placement Units
Simultaneously
with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 600,000 Private Placement Units at a price of $10.00
per Private Placement Unit ($6,000,000 in the aggregate). Each Private Placement Unit consists of one share of Class A common stock and
one-third of one warrant (the “Private Placement Warrants”). Each whole Private Placement Warrant is exercisable for one
share of Class A common stock at a price of $11.50 per share. The proceeds from the Private Placement Units have been added to the net
proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the
Combination Period, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable and exercisable
on a cashless basis so long as they are held by the Sponsor or its permitted transferees.
The
Private Placement Warrants will expire five years after the completion of the Business Combination or earlier upon redemption or liquidation.
The
Sponsor and the Company’s officers and directors have agreed, subject to limited exceptions, not to transfer, assign or sell any
of their Private Placement Units until 30 days after the completion of the initial Business Combination.
Underwriter
The
lead underwriter is an affiliate of the Sponsor (see Note 5).
Business
Combination Marketing Agreement
The
Company has engaged Cantor Fitzgerald & Co. (“CF&Co.”), an affiliate of the Sponsor, as an advisor in connection
with the Business Combination to assist the Company in holding meetings with its stockholders to discuss the Business Combination and
the target business’ attributes, introduce the Company to potential investors that are interested in purchasing the Company’s
securities, assist the Company in obtaining stockholder approval for the Business Combination and assist the Company with its press releases
and public filings in connection with the Business Combination. The Company will pay CF&Co. a cash fee (the “Marketing Fee”)
for such services upon the consummation of the Business Combination in an amount of $8,750,000, which is equal to 3.5% of the gross proceeds
of the Initial Public Offering.
Related
Party Loans
The
Sponsor made available to the Company, under the Pre-IPO Note, up to $300,000 to be used for a portion of the expenses of the Initial
Public Offering. Prior to closing the Initial Public Offering, the amount outstanding under the Pre-IPO Note was $148,445. The Pre-IPO
Note was non-interest bearing and was repaid in full upon the completion of the Initial Public Offering.
In
order to finance transaction costs in connection with an intended initial Business Combination, the Sponsor has committed, pursuant to
the Sponsor Loan, up to $1,750,000 to be provided to the Company to fund the Company’s expenses relating to investigating and selecting
a target business and other working capital requirements, including $10,000 per month for office space, administrative and shared personnel
support services that will be paid to the Sponsor, after the Initial Public Offering and prior to the Company’s initial Business
Combination. As of September 30, 2021 and December 31, 2020, the Company had borrowed $1,197,223 and $0, respectively, under the Sponsor
Loan.
If
the Sponsor Loan is insufficient to cover the working capital requirements of the Company, the Sponsor or an affiliate of the Sponsor,
or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the
proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside
the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the
Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital
Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements
exist with respect to such loans.
The
Sponsor pays expenses on the Company’s behalf. The Company reimburses the Sponsor for such expenses paid on its behalf. The unpaid
balance is included in Payables to related parties on the accompanying balance sheet. As of September 30, 2021 and December 31, 2020,
the Company had accounts payable outstanding to the Sponsor for such expenses paid on the Company’s behalf of $0 and $37,640, respectively.
Note
5—Commitments and Contingencies
Registration
Rights
Pursuant
to a registration rights agreement entered into on January 28, 2021, the holders of Founder Shares and Private Placement Units (and component
securities) are entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of
Class A common stock). These holders are entitled to certain demand and “piggyback” registration rights. The Company will
bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting
Agreement
The
Company granted CF&Co., the lead underwriter and an affiliate of the Sponsor, a 45-day option to purchase up to 3,750,000 additional
Units to cover over-allotments at the Initial Public Offering price less the underwriting discounts and commissions. On February 2, 2021,
simultaneously with the closing of the Initial Public Offering, CF&Co. advised the Company that it would not exercise the over-allotment
option.
CF&Co.
was paid a cash underwriting discount of $5,000,000 in connection with the Initial Public Offering.
The
Company also engaged a qualified independent underwriter to participate in the preparation of the registration statement and exercise
the usual standards of “due diligence” in respect thereto. The Company paid the independent underwriter a fee of $100,000
upon the completion of the Initial Public Offering in consideration for its services and expenses as the qualified independent underwriter.
The qualified independent underwriter received no other compensation.
Business
Combination Marketing Agreement
The
Company has engaged CF&Co. as an advisor in connection with the Company’s Business Combination (see Note 4).
Risks
and Uncertainties
Management
is continuing to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible
that the pandemic could have an effect on the Company’s financial position, results of its operations and/or search for a target
company, the specific impact is not readily determinable as of the date of the unaudited condensed financial statements. The unaudited
condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note
6—Stockholders’ Equity
Class
A Common Stock - The Company is authorized to issue 240,000,000 shares of Class A common stock, par value $0.0001 per
share. As of September 30, 2021, there were 600,000 shares of Class A common stock issued and outstanding, excluding 25,000,000 shares
subject to possible redemption. As of December 31, 2020, there were no shares of Class A common stock issued and outstanding. The outstanding
Class A common stock includes 600,000 shares included in the Private Placement Units. The shares of Class A common stock included in
the Private Placement Units do not contain the same redemption features contained in the Public Shares.
Class
B Common Stock - The Company is authorized to issue 30,000,000 shares of Class B common stock, par value $0.0001 per
share. Holders of Class B common stock are entitled to one vote for each share. As of September 30, 2021 and December 31, 2020, there
were 6,250,000 and 7,187,500 shares of Class B common stock issued and outstanding, respectively. In connection with the underwriter
advising the Company that it would not exercise its over-allotment option, the Sponsor forfeited 937,500 shares of Class B common stock,
such that the initial stockholders would collectively own 20% of the Company’s issued and outstanding shares of common stock after
the Initial Public Offering (not including the Private Placement Units).
Prior
to the consummation of the Business Combination, only holders of Class B common stock have the right to vote on the election of directors.
Holders of Class A common stock are not entitled to vote on the election of directors during such time. Holders of Class A common stock
and Class B common stock vote together as a single class on all other matters submitted to a vote of stockholders except as required
by law.
The
shares of Class B common stock will automatically convert into shares of Class A common stock at the time of the Business Combination
on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities,
are issued or deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of the 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 the completion of the Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed
issued in connection with the Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any
seller in the Business Combination).
On
October 1, 2020, the Company effected a 1.25-for-1 stock split. In December 2020 and January 2021, the Sponsor returned to the Company,
at no cost, an aggregate of 7,187,500 Founder Shares, which were cancelled. Information contained in the unaudited condensed financial
statements has been retroactively adjusted for this split and cancellation. On February 2, 2021, the Sponsor forfeited 937,500 shares
of Class B common stock, resulting in an aggregate of 6,250,000 Founder Shares outstanding and held by the Sponsor and independent directors
of the Company.
Preferred
Stock - The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such
designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors.
As of both September 30, 2021 and December 31, 2020, there were no shares of preferred stock issued or outstanding.
Note
7—Warrants
Public
Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants.
The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b)
12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective registration statement
under the Securities Act covering the shares of common stock issuable upon exercise of the Public Warrants and a current prospectus relating
to them is available.
The
Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination,
the Company will use its commercially reasonable best 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 Public Warrants. The Company will use its commercially
reasonable best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a
current prospectus relating thereto, until the expiration of the Public Warrants in accordance with the provisions of the warrant agreement.
Notwithstanding the foregoing, if a registration statement covering the shares of Class A common stock issuable upon exercise of the
Public Warrants is not effective within a specified period following the consummation of Business Combination, warrant holders may, 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 pursuant to the exemption provided by Section 3(a)(9) of the Securities
Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to
exercise their warrants on a cashless basis. The Public Warrants will expire five years after the completion of a Business Combination
or earlier upon redemption or liquidation.
The
Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the Class A common stock
issuable upon the exercise of the 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 will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial
purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or
their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the
same basis as the Public Warrants.
The
Company may redeem the Public Warrants:
|
●
|
in whole and not in part;
|
|
●
|
at a price of $0.01 per warrant;
|
|
●
|
at any time during the
exercise period;
|
|
●
|
upon a minimum of 30 days’
prior written notice of redemption;
|
|
●
|
if, and only if, the last reported sale price of the Company’s common stock equals or exceeds $18.00 per share for any 20-trading days within a 30-trading day period ending on the third business day prior to the date on which the Company sends the notice of redemption to the warrant holders; and
|
|
●
|
if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such warrants.
|
If
the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the
Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.
The
exercise price and number of shares of Class A common stock issuable upon exercise of the Warrants may be adjusted in certain circumstances
including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the Warrants will
not be adjusted for issuance of Class A common stock at a price below its exercise price. Additionally, in no event will the Company
be required to net cash settle the Warrants. If the Company is unable to complete a Business Combination within the Combination Period
and the Company liquidates the funds held in the Trust Account, holders of Warrants will not receive any of such funds with respect to
their Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect
to such Warrants. Accordingly, the Warrants may expire worthless.
Note
8—Fair Value Measurements on a Recurring Basis
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
to valuation techniques 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 three levels of the fair value hierarchy
are:
|
●
|
Level 1
measurements – unadjusted observable inputs such as quoted prices for identical instruments in active markets;
|
|
●
|
Level 2
measurements – 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
measurements – unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its
own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value
drivers are unobservable.
|
In
some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In
those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input
that is significant to the fair value measurement.
The
following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring
basis as of September 30, 2021 and indicates the fair value hierarchy of the inputs that the Company utilized to determine such fair
value.
September
30, 2021
Description
|
|
Quoted Prices
in Active Markets
(Level 1)
|
|
|
Significant
Other
Observable Inputs
(Level 2)
|
|
|
Significant
Other
Unobservable Inputs
(Level 3)
|
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets held in Trust Account - U.S. Treasury Securities
|
|
$
|
250,014,385
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
250,014,385
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability
|
|
$
|
-
|
|
|
$
|
8,277,333
|
|
|
$
|
-
|
|
|
$
|
8,277,333
|
|
FPS liability
|
|
|
-
|
|
|
|
-
|
|
|
|
2,055,630
|
|
|
|
2,055,630
|
|
Total
Liabilities
|
|
$
|
-
|
|
|
$
|
8,277,333
|
|
|
$
|
2,055,630
|
|
|
$
|
10,332,963
|
|
Level
1 assets as of September 30, 2021 include investments in a money market fund that holds U.S. Treasury securities. The Company uses inputs
such as actual trade data, benchmark yields, quoted market prices from dealers or brokers, and other similar sources to determine the
fair value of its investments.
Warrant
Liability
The
Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liability on the Company’s
balance sheet. The warrant liability is measured at fair value at inception and on a recurring basis, with any subsequent changes in
fair value presented within change in fair value of warrant liability in the Company’s statement of operations.
Initial
Measurement
The
Company established the initial fair value for the Warrants on February 2, 2021, the date of the closing of the Initial Public Offering,
and subsequent fair value as of March 31, 2021. The Public Warrants and Private Placement Warrants were measured at fair value on a recurring
basis, using an Options Pricing Model (the “OPM”). The Company allocated the proceeds received from (i) the sale of Units
in the Initial Public Offering (which is inclusive of one share of Class A common stock and one-third of one Public Warrant), (ii) the
sale of the Private Placement Units (which is inclusive of one share of Class A common stock and one-third of one Private Placement Warrant),
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. The Warrants were classified as Level 3
at the initial measurement date due to the use of unobservable inputs.
The
Company utilized the OPM to value the Warrants as of February 2, 2021, with any subsequent changes in fair value recognized in the statement
of operations. The estimated fair value of the warrant liability as of February 2, 2021 was determined using Level 3 inputs. Inherent
in the OPM are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The
Company estimated the volatility of its shares of common stock based on historical volatility that matches the expected remaining life
of the Warrants. The risk-free interest rate was based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity
similar to the expected remaining life of the Warrants. The expected life of the Warrants was assumed to be equivalent to their remaining
contractual term. The dividend rate was based on the historical rate, which the Company anticipated to remain at zero. The aforementioned
warrant liability is not subject to qualified hedge accounting.
The
following table provides quantitative information about the inputs utilized by the Company in the fair value measurement of the Warrants
as of February 2, 2021:
|
|
February 2,
2021
|
|
Risk-free interest rate
|
|
|
0.61
|
%
|
Expected term (years)
|
|
|
5
|
|
Expected volatility
|
|
|
17.5
|
%
|
Exercise price
|
|
$
|
11.50
|
|
Stock price
|
|
$
|
10.00
|
|
Dividend yield
|
|
|
0.0
|
%
|
Subsequent
Measurement
During
the nine months ended September 30, 2021, the fair value measurement of the Public Warrants was reclassified from Level 3 to Level 2
due to the use of an observable quoted price in an inactive market. As the transfer of Private Placement Warrants to anyone who is not
a permitted transferee would result in the Private Placement Warrants having substantially the same terms as the Public Warrants, the
Company determined that the fair value of the Private Placement Warrants is equivalent to that of the Public Warrants. As such, the Private
Placement Warrants were reclassified from Level 3 to Level 2 during the nine months ended September 30, 2021.
As
of September 30, 2021, the aggregate fair values of the Private Placement Warrants and Public Warrants were $0.2 million and $8.1 million,
respectively.
The
following table presents the changes in the fair value of warrant liability:
|
|
Private
Placement
|
|
|
Public
|
|
|
Warrant
Liability
|
|
Fair value as of February 2, 2021
|
|
$
|
242,560
|
|
|
$
|
10,106,666
|
|
|
$
|
10,349,226
|
|
Change in valuation inputs or other assumptions(1)
|
|
|
(104,560
|
)
|
|
|
(4,356,666
|
)
|
|
|
(4,461,226
|
)
|
Fair value as of March 31, 2021
|
|
|
138,000
|
|
|
|
5,750,000
|
|
|
|
5,888,000
|
|
Change in valuation inputs or other assumptions(1)
|
|
|
82,000
|
|
|
|
3,416,666
|
|
|
|
3,498,666
|
|
Fair value as of June 30, 2021
|
|
|
220,000
|
|
|
|
9,166,666
|
|
|
|
9,386,666
|
|
Change in valuation inputs or other assumptions(1)
|
|
|
(26,000
|
)
|
|
|
(1,083,333
|
)
|
|
|
(1,109,333
|
)
|
Fair value as of September 30, 2021(2)
|
|
$
|
194,000
|
|
|
$
|
8,083,333
|
|
|
$
|
8,277,333
|
|
(1)
|
Changes in valuation inputs
or other assumptions are recognized in Change in fair value of warrant liability in the statement of operations.
|
(2)
|
Due to the use of quoted prices in an inactive market and the use of observable inputs for similar assets or liabilities (Level 2) for Public Warrants and Private Placement Warrants, respectively, subsequent to initial measurement, the Company had transfers out of Level 3 totaling $5.9 million during the nine months ended September 30, 2021. The company did not have any transfers out of Level 3 during the three months ended September 30, 2021.
|
FPS
Liability
The
liability for the FPS was valued using an adjusted net assets method, which is considered to be a Level 3 fair value measurement. Under
the adjusted net assets method utilized, the aggregate commitment of $10.0 million pursuant to the FPA is discounted to present value
and compared to the fair value of the shares of common stock and warrants to be issued pursuant to the FPA. The fair value of the shares
of common stock and warrants to be issued under the FPA are based on the public trading price of the Units issued in the Initial Public
Offering. The excess (liability) or deficit (asset) of the fair value of the shares of common stock and warrants to be issued compared
to the $10.0 million fixed commitment is then reduced to account for the probability of consummation of the Business Combination. The
primary unobservable input utilized in determining the fair value of the FPS is the probability of consummation of the Business Combination.
As of September 30, 2021, the probability assigned to the consummation of the Business Combination was 82% which was determined based
on a hybrid approach of both observed success rates of business combinations for special purpose acquisition companies and the Sponsor’s
track record for consummating similar transactions.
The
following table presents a summary of the changes in the fair value of the FPS liability:
|
|
FPS Liability
|
|
Fair value as of February 2, 2021
|
|
$
|
2,667,992
|
|
Change in valuation inputs or other assumptions(1)
|
|
|
(615,957
|
)
|
Fair value as of March 31, 2021
|
|
|
2,052,035
|
|
Change in valuation inputs or other assumptions(1)
|
|
|
166,057
|
|
Fair value as of June 30, 2021
|
|
|
2,218,092
|
|
Change in valuation inputs or other assumptions(1)
|
|
|
(162,462
|
)
|
Fair value as of September 30, 2021
|
|
$
|
2,055,630
|
|
(1)
|
Changes in valuation inputs
or other assumptions are recognized in Change in fair value of FPS liability in the statement of operations.
|
Note
9—Subsequent Events
The Company evaluated subsequent events and transactions
that occurred after the financial statements date through the date that the unaudited condensed financial statements were available to
be issued and determined that there have been no events that have occurred that would require adjustments to the disclosures in the unaudited
condensed financial statements other than as described below.
On November 12, 2021, the Company filed a Proxy
Statement in connection with the special meeting of stockholders to be held in connection with the previously announced business combination
with Satellogic (the “Special Meeting”) (see Note 1) to approve the Merger Agreement and the other proposals set forth in
the Proxy Statement. In addition, on November 12, 2021, the Company and Satellogic issued a joint press release announcing that the SEC
declared effective the Form F-4, that the Company has filed the Proxy Statement and has established November 1, 2021 as the record date
for the Special Meeting and that the Special Meeting will be held on December 8, 2021.