NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note
1 — Description of Organization and Business Operations
Power &
Digital Infrastructure Acquisition II Corp. (the “Company”) is a blank check company incorporated in Delaware on March 23,
2021. 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 or entities (the “Business Combination”). The Company is an emerging
growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.
As
of March 31, 2022, the Company had not commenced any operations. All activity for the period from March 23, 2021 (inception) through
March 31, 2022 relates to the Company’s formation and the initial public offering (“Initial Public Offering”), as described
below. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest.
The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived
from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The
Company’s sponsor is XPDI Sponsor II LLC, a Delaware limited liability company (the “Sponsor”). The registration statement
for the Company’s Initial Public Offering was declared effective on December 9, 2021. On December 14, 2021, the Company consummated
its Initial Public Offering of 28,750,000 units (the “Units” and, with respect to the Class A common
stock included in the Units being offered, the “Public Shares”), which included the exercise of the underwriters’ option
to purchase an additional 3,750,000 Units at the initial public offering price to cover over-allotments (the “Over-Allotment
Units”), at $10.00 per Unit, generating gross proceeds of $287.5 million, and incurring offering costs of approximately
$20.7 million, of which approximately $10.1 million was for deferred underwriting fees (see Note 5).
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 11,125,000 warrants
(each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), at a price of $1.00 per
Private Placement Warrant to the Sponsor and certain funds and accounts managed by subsidiaries of BlackRock, Inc., an unrelated party
(the “Anchor Investors”), generating proceeds of approximately $11.1 million (Note 4).
Upon
the closing of the Initial Public Offering and the Private Placement, approximately $290.4 million ($10.10 per Unit)
of the net proceeds of the sale of the Units in the Initial Public Offering and of the Private Placement Warrants in the Private Placement
were placed in a trust account (“Trust Account”) located in the United States with Continental Stock Transfer &
Trust Company acting as trustee, and invested only in U.S. “government securities,” within the meaning of Section 2(a)(16)
of the Investment Company Act 1940, as amended (the “Investment Company Act”), having a maturity of 185 days or less
or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act, which invest
only in direct U.S. government treasury obligations, 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.
While
the Company’s management has broad discretion with respect to the specific application of the cash held outside of the Trust Account,
substantially all of the net proceeds from the Initial Public Offering and the sale of the Private Placement Warrants, which are placed
in the Trust Account, are intended to be applied generally toward completing 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 net assets held in the Trust Account (excluding the deferred underwriting
commissions and taxes payable by us on the income earned on the trust account) at the time of the agreement to enter into the initial
Business Combination. However, the Company only intends to complete a Business Combination if the post-transaction company owns
or acquires 50% or more of the issued and 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 (the “Public Stockholders”) of the Company’s Public Shares 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 held in the Trust Account
(initially at $10.10 per Public Share). The per-share amount to be distributed to Public Stockholders who redeem their Public Shares
will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 5). All of
the Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the liquidation,
if there is a stockholder vote or tender offer in connection with the initial Business Combination and in connection with certain amendments
to the Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”).
These Public Shares were recorded at a redemption value and classified as temporary equity in accordance with the Financial Accounting
Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities
from Equity” (“ASC 480”). The Company will proceed with a Business Combination if a majority of the shares voted are
voted in favor of the Business Combination. The Company will not redeem the Public Shares in an amount that would cause its net tangible
assets to be less than $5,000,001 immediately following 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, conduct the redemptions pursuant to the tender offer
rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing
a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder
approval for business or legal reasons, the Company will offer to redeem the Public 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 transaction. If the Company seeks stockholder approval in connection
with a Business Combination, the initial stockholders (as defined below) agreed to vote their Founder Shares (as defined below in Note
4) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. In addition, the initial
stockholders agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion
of a Business Combination.
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% of the Public Shares, without the prior consent of the Company.
The
Company will have until 18 months from the closing of the Initial Public Offering, or June 14, 2023 (the “Combination Period”),
to complete the initial Business Combination. However, if the Company anticipates that it may not be able to complete the initial Business
Combination within 18 months, the Company may, but is not obligated to, extend the period of time it will have to complete an initial
Business Combination by up to two additional three-month periods (for a total of up to 24 months from the closing of the Initial
Public Offering to complete a Business Combination), subject to the Sponsor or its affiliates or designees contributing, for each such
three-month extension, $0.10 per share of Class A common stock to the Trust Account (or approximately $2.9 million in the aggregate).
In connection with each such additional deposit, the Sponsor or its affiliates or designees will receive an additional 2,875,000 private
placement warrants, with the same terms as the original Private Placement Warrants. The Public Stockholders will not be entitled to vote
on, or redeem their shares in connection with, any such extension.
If
the Company is unable to complete a Business Combination within the Combination Period, or such later date as approved by holders of
a majority of the voting power of the Company’s then outstanding shares of common stock that are voted at a meeting to extend such
Combination Period, voting together as a single class, the Company will (1) cease all operations except for the purpose of winding
up; (2) as promptly as reasonably possible but not more than 10 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 (less up to $100,000 of interest
to pay dissolution expenses and which interest shall be net of taxes payable by us), divided by the number of then issued and outstanding
Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to
receive further liquidating distributions, if any); and (3) as promptly as reasonably possible following such redemption, subject
to the approval of the remaining stockholders and the Company’s board of directors, liquidate and dissolve, subject in each case
to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
The
holders of the Founder Shares (the “initial stockholders”) agreed not to propose an amendment to the Amended and Restated
Certificate of Incorporation (A) to modify the substance or timing of the Company’s obligation to allow redemption in connection
with its initial business combination or to redeem 100% of the Public Shares if the Company has not consummated an initial business
combination within 18 months (or 21 months or 24 months, as applicable) from the closing of the Initial Public Offering
or (B) with respect to any other provisions of the Amended and Restated Certificate of Incorporation relating to stockholders’
rights or pre-initial business combination activity, unless the Company provides the Public Stockholders with the opportunity to
redeem their Public Shares in conjunction with any such amendment.
The
initial stockholders and Anchor Investors agreed to waive their rights to liquidating distributions from the Trust Account with respect
to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the initial
stockholders and Anchor Investors acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating
distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within
the Combination Period. The underwriters agreed to waive their rights to the deferred underwriting commission (see Note 5) held in the
Trust Account in the event the Company does not complete a Business Combination within in the Combination Period and, in such event,
such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public
Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for
distribution (including Trust Account assets) will be only $10.10, or $10.20 or $10.30 per Public Share, as applicable, if the Company
extends the period of time the Company will have to complete an initial business combination. In order to protect the amounts held in
the Trust Account, the Sponsor agreed to be liable to the Company if and to the extent any claims by a third party (except for the Company’s
independent registered public accounting firm) 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 (a “Target”), reduce the amount of funds in the
Trust Account to below (i) $10.10 per Public Share, or $10.20 or $10.30 per public share, as applicable, if the Company extends the period
of time it will have to complete an initial Business Combination, or (ii) the lesser amount per Public Share held in the Trust Account
as of the date of the liquidation of the Trust Account due to reductions in the value of the Trust assets, in each case net of interest
which may be withdrawn to pay taxes, provided that such liability will not apply to any claims by a third party or Target that executed
a waiver of any and all rights to seek access to the Trust Account nor will it apply 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”). 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 (other than the Company’s independent registered public accounting firm), 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.
Note
2 — Basis of Presentation and Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying condensed financial statements of the Company have been prepared in accordance with United States generally accepted accounting
principles (“GAAP”) for interim financial information and Article 8 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by GAAP. In the opinion of management, all adjustments (consisting of normal accruals) considered
for a fair presentation have been included. Operating results for the three months ended March 31, 2022 are not necessarily indicative
of the results that may be expected for the year ending December 31, 2022 or any future period.
The
accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K
for the year ended December 31, 2021, as filed with the SEC on April 13, 2022, which contains the audited financial statements and notes
thereto. The financial information as of December 31, 2021, is derived from the audited financial statements presented in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on April 13, 2022.
Liquidity
and Going Concern
As
of March 31, 2022, the Company had approximately $1.6 million in cash and working capital of approximately $1.1 million (not
taking into account approximately $29,000 in tax obligations that may be paid using investment income classified in the Trust Account).
The
Company’s liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the payment of $25,000 from
the Sponsor to cover certain offering costs on behalf of the Company in exchange for issuance of Founder Shares (as defined in Note 4)
and a loan from a related party of approximately $115,000 under the Note (as defined in Note 4). The Company fully repaid the Note
on December 17, 2021. Subsequent to the consummation of the Initial Public Offering, the Company’s liquidity has been satisfied
through the net proceeds from the consummation of the Initial Public Offering and the Private Placement held outside of the Trust Account.
In
addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor, members of the Company’s
founding team or any of their affiliates may, but are not obligated to, loan the Company funds under the Working Capital Loans (as defined
and described in Note 4).
Until
the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and
evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel
expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination. The
Company will need to raise additional capital through loans or additional investments from its Sponsor, shareholders, officers,
directors, or third parties. The Company's officers, directors and Sponsor may, but are not obligated to, loan us funds from time to
time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet our working capital needs.
Accordingly, the Company may not be able to obtain additional financing. If the Company are unable to raise additional capital, it
may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to,
curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses.
The
Company cannot provide any
assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial
doubt about the Company’s ability to continue as a going concern through one year from the issuance date of these condensed
consolidated financial statements. These financial statements do not include any adjustments relating to the recovery of the
recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going
concern.
Risks
and Uncertainties
Management
is currently evaluating the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible
that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a
target company, the specific impact is not readily determinable as of the date of the condensed financial statements. The condensed financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart
Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not
being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act
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 condensed financial
statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of
using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use
of Estimates
The
preparation of financial statements in conformity with 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 condensed
financial statements. Actual results could differ from those estimates.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution
which, at times, may exceed the Federal Depository Insurance Corporation coverage of $250,000. The Company has not experienced losses
on this account and management believes the Company is not exposed to significant risks on such account.
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 as of March 31, 2022 and December 31, 2021.
Investments
Held in Trust Account
The
Company’s portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16)
of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government
securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held
in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When the Company’s
investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities
and investments in money market funds are presented on the condensed balance sheets at fair value at the end of each reporting period.
Gains and losses resulting from the change in fair value of these securities is included in income from investments held in Trust Account
in the accompanying statement of operations. The estimated fair values of investments held in the Trust Account are determined using
available market information.
Fair
Value 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,” approximates the carrying amounts represented in the condensed balance sheets,
primarily due to their short-term nature.
Fair
Value Measurements
Fair
value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction
between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
|
● |
Level 1,
defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
|
● |
Level 2,
defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices
for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
|
● |
Level 3,
defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions,
such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In
some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In
those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input
that is significant to the fair value measurement.
Derivative
Financial Instruments
The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates
all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain
features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815, “Derivatives and Hedging” (“ASC 815”).
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed
at the end of each reporting period.
The
warrants issued in the Initial Public Offering (“Public Warrants”) and the Private Placement Warrants are not precluded from
equity classification, based on the guidance in ASC 480 and ASC 815. Equity-classified contracts are initially measured at fair value
(or allocated value). Subsequent changes in fair value are not recognized as long as the contracts continue to be classified in equity.
Offering
Costs Associated with the Initial Public Offering
Offering
costs consisted of legal, accounting, underwriting fees and other costs incurred that were directly related to the Initial Public Offering.
Upon completion of the Initial Public Offering, offering costs were allocated to the separable financial instruments issued in the Initial
Public Offering on a relative fair value basis, compared to total proceeds received. Offering costs associated with the Class A common
stock were charged to the carrying value of Class A common stock subject to possible redemption upon the completion of the Initial Public
Offering. Offering costs associated with the Public Warrants and the Private Placement Warrants were recognized net in equity.
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 are measured at fair value. Conditionally
redeemable shares of 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.
Shares of Class A common stock of the Company 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 March 31, 2022 and December 31, 2021, 28,750,000 shares
of Class A common stock subject to possible redemption were presented as temporary equity, outside of the stockholders’ equity
section of the Company’s condensed balance sheets.
Under
ASC 480, the Company has elected to recognize changes in the redemption value immediately as they occur and adjust the carrying value
of the security to equal the redemption value at the end of the reporting period. This method would view the end of the reporting period
as if it were also the redemption date of the security. Effective with the closing of the Initial Public Offering, the Company recognized
the accretion from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent
available) and accumulated deficit.
Income
Taxes
The
Company complies with the accounting and reporting requirements of FASB ASC Topic 740, “Income Taxes” (“ASC 740”),
which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and
liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in
future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected
to be realized.
FASB
ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement
of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely
than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of March 31, 2022 and December
31, 2021. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts
were accrued for the payment of interest and penalties as of March 31, 2022 and December 31, 2021. The Company is currently not aware
of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is
subject to income tax examinations by major taxing authorities since inception.
Net
Income (Loss) per Common Share
The
Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has
two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata
between the two classes of shares. Net income (loss) per common share is calculated by dividing the net income (loss) by the weighted
average shares of common stock outstanding for the respective period.
The
calculation of diluted net income (loss) does not consider the effect of the Public Warrants and the Private Placement Warrants to purchase
an aggregate of 25,500,000 Class A common stock in the calculation of diluted income (loss) per share, because their exercise
is contingent upon future events and their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted
net income (loss) per share is the same as basic net income (loss) per share for the three months ended March 31, 2022 and for period
from March 23, 2021 (inception) through March 31, 2021. Accretion associated with the redeemable Class A common stock is excluded from
earnings per share as the redemption value approximates fair value.
| |
For The Three Months Ended March 31,
2022 | |
| |
Class A | | |
Class B | |
Basic and diluted net loss per common stock: | |
| | | |
| | |
Numerator: | |
| | | |
| | |
Allocation of net loss | |
$ | (340,631 | ) | |
$ | (85,158 | ) |
Denominator: | |
| | | |
| | |
Basic and diluted weighted average common stock outstanding | |
| 28,750,000 | | |
| 7,187,500 | |
Basic and diluted net loss per common stock | |
$ | (0.01 | ) | |
$ | (0.01 | ) |
| |
For The
Period From
March 23, 2021
(inception) through
March 31,
2021 | |
| |
Class B | |
Basic and diluted net loss per common stock: | |
| | |
Numerator: | |
| | |
Allocation of net loss | |
$ | (973 | ) |
Denominator: | |
| | |
Basic and diluted
weighted average common stock outstanding(1) | |
| 6,250,000 | |
Basic and diluted net loss per common stock | |
$ | (0.00 | ) |
(1) | This number excludes an aggregate of up to 937,500 shares of Class B common stock subject to
forfeiture if the over-allotment option is not exercised in full or in part by the underwriters |
Recent
Accounting Pronouncements
Management
does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect
on the Company’s condensed financial statements.
Note 3
— Initial Public Offering
On
December 14, 2021, the Company consummated its Initial Public Offering of 28,750,000 Units, which included the exercise
of the underwriters’ option to purchase an additional 3,750,000 Over-Allotment Units at the initial public offering price,
generating gross proceeds of $287.5 million, and incurring offering costs of approximately $20.7 million, of which approximately
$10.1 million was for deferred underwriting fees.
Each
Unit consists of one share of Class A common stock, and one-half of one redeemable warrant (each, a “Public Warrant”).
Each 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 7).
Note
4 — Related Party Transactions
Founder
Shares
On
March 30, 2021, the Sponsor paid $25,000 to cover for certain offering costs on behalf of the Company in exchange for
issuance of 5,750,000 shares of the Company’s Class B common stock, par value $0.0001 per share, (the
“Founder Shares”). In November 2021, the Company effected a stock dividend of 1,437,500 shares of Class B
common stock, resulting in there being an aggregate of 7,187,500 shares of Class B common stock outstanding. All shares
and associated amounts have been retroactively restated to reflect the stock dividend. The initial stockholders agreed to forfeit up
to an aggregate of 937,500 Founder Shares, so that the Founder Shares would represent 20.0% of the Company’s
issued and outstanding shares after the Initial Public Offering. The underwriters exercised their over-allotment option in full on
December 14, 2021; thus, these 937,500 Founder Shares were no longer subject to forfeiture.
In
July 2021, the Sponsor transferred 30,000 Founder Shares to each of the four independent director nominees, a total of 120,000 Founder
Shares. In November 2021, the Sponsor repurchased 30,000 shares of Class B common stock from a former independent director
nominee at a price of $120. The transfer of the Founder Shares is in the scope of FASB ASC Topic 718, “Compensation-Stock Compensation”
(“ASC 718”). Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair
value upon the grant date. The Founders Shares were granted subject to a performance condition (i.e., the occurrence of a Business Combination).
Compensation expense related to the Founders Shares is recognized only when the performance condition is probable of occurrence under
the applicable accounting literature in this circumstance. As of March 31, 2022, the Company determined that a Business Combination is
not considered probable, and, therefore, no stock-based compensation expense has been recognized. Stock-based compensation
of approximately $516,000 will be recognized at the date a Business Combination is considered probable (i.e., upon completion of
a Business Combination).
In
exchange for the Anchor Investors participating in the Initial Public Offering and the Private Placement, the Company agreed sell 1,078,125
Founder Shares to the Anchor Investors, and the Anchor Investors agreed to purchase from the Company on the date of the initial Business
Combination such Founder Shares. The Sponsor also agreed that in the event of such purchase by the Anchor Investors, the Sponsor
will forfeit to the Company for no consideration a number of Founder Shares equal to the number of Founder Shares purchased by the Anchor
Investors. Further, the Anchor Investors agreed that, if they do not own an aggregate of at least certain amount of Public Shares (such
amount, the “Anchor Threshold”) at the time of any stockholder vote with respect to an initial Business Combination or the
business day immediately prior to the completion of the initial Business Combination, the number of Founder Shares to be purchased by
such Anchor Investors from the Company will be reduced pro rata by a fraction, the numerator of which will equal the Anchor Threshold
less the number of Public Shares held by such Anchor Investors after giving effect to any redemptions of the Public Shares by such Anchor
Investors and their affiliates, and the denominator of which will equal the Anchor Threshold; provided, however, in no event will such
pro rata reduction in the number of Founder Shares to be purchased by the Anchor Investors reduce the number of Founder Shares to be
purchased by more than 75%. The Company determined that the excess of the fair value of the Founder Shares to be acquired by the
Anchor Investors upon the closing of the initial Business Combination (in which case the Sponsor also agreed to forfeit to the Company
for no consideration a number of Founder Shares equal to the number of Founder Shares purchased by the Anchor Investors) should be recognized
as an offering cost by the Company in accordance with SEC Staff Accounting Bulletin (“SAB”) Topic 5A, “Expenses of
Offerings.” The Company estimated the aggregate fair value of the Sponsor’s agreement to sell Founder Shares to the Anchor
Investors to be approximately $4.7 million using a Monte Carlo simulation. Accordingly, the additional offering cost is allocated
to the separable financial instruments issued in the Initial Public Offering on a relative fair value basis, compared to total proceeds
received. The allocated portion of the additional offering cost associated with the Class A common stock was charged to the carrying
value of Class A common stock subject to possible redemption upon the completion of the Initial Public Offering.
The
initial stockholders and the Anchor Investors agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder
Shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination; and (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, reorganization 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.
Any permitted transferees would be subject to the same restrictions and other agreements of the initial stockholders and the Anchor Investors
with respect to any Founder Shares.
Private
Placement Warrants
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the Private Placement of 11,125,000 Private Placement
Warrants, at a price of $1.00 per Private Placement Warrant to the Sponsor and the Anchor Investors, generating proceeds of approximately
$11.1 million.
Each
Private Placement Warrant is exercisable for one whole share of Class A common stock at a price of $11.50 per share. A portion
of the proceeds from the sale of the Private Placement Warrants was added to the 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
purchasers of the Private Placement Warrants agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private
Placement Warrants (except to permitted transferees) until 30 days after the completion of the initial Business Combination.
Related
Party Loans
On
March 30, 2021, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial
Public Offering pursuant to a promissory note (as amended and restated on July 1, 2021, the “Note”). This loan was non-interest bearing
and payable upon the completion of the Initial Public Offering. As of December 14, 2021, the Company borrowed approximately $115,000 under
the Note. The Company fully repaid the Note on December 17, 2021.
In
addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor,
or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the
proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside
the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the
Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital
Loans. The Working Capital Loans would either be repaid upon completion of a Business Combination or, at the lender’s discretion,
up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price
of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. 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. As of March
31, 2022 and December 31, 2021, the Company had no borrowings under the Working Capital Loans.
Administrative
Services Agreement
Commencing
on December 9, 2021 through the earlier of consummation of the initial Business Combination and the Company’s liquidation, the
Company agreed to pay affiliates of the Sponsor a total of $20,000 per month for office space, administrative and support
services. During the three months ended March 31, 2022 and the period from March 23, 2021 (inception) through March 31, 2021, the
Company incurred $60,000 and $0 of such fees, respectively, which are recognized in general and administrative expenses - related
party, in the accompanying condensed statements of operations. As of March 31, 2022 and December 31, 2021, the Company had $80,000
and $20,000 payable in connection with such agreement, included as accrued expenses in the accompanying condensed balance
sheets.
Note
5 — Commitments and Contingencies
Registration
Rights
The
holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any
(and any shares of common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the
Working Capital Loans and upon conversion of the Founder Shares), were entitled to registration rights pursuant to a registration rights
agreement to be signed prior to the consummation of the Initial Public Offering. These holders are entitled to certain demand and “piggyback”
registration rights. However, the registration rights agreement provides that the Company will not be required to effect or permit any
registration or cause any registration statement to become effective until termination of the applicable lock-up period. The Company
will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting
Agreement
The
underwriters were entitled to an underwriting discount of $0.20 per Unit on all Units sold in the Initial Public Offering, except for
the Units purchased by the Anchor Investors, or approximately $5.3 million in the aggregate, paid upon the closing of the Initial
Public Offering.
An
additional fee of $0.35 per Unit, or approximately $10.1 million in the aggregate will be payable to the underwriters for deferred
underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely
in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Note
6 — Class A Common Stock Subject to Possible Redemption
The
Company’s Class A common stock feature certain redemption rights that are considered to be outside of the Company’s control
and subject to the occurrence of future events. The Company is authorized to issue 500,000,000 shares of Class A common stock
with a par value of $0.0001 per share. Holders of the Company’s Class A common stock are entitled to one vote for each share.
As of March 31, 2022 and December 31, 2021, there were 28,750,000 shares of Class A common stock outstanding, which were all
subject to possible redemption and classified outside of permanent equity in the accompanying condensed balance sheets.
The
Class A common stock subject to possible redemption reflected on the condensed balance sheets is reconciled on the following table:
Gross proceeds | |
$ | 287,500,000 | |
Less: | |
| | |
Proceeds allocated to Public Warrants | |
| (14,662,500 | ) |
Issuance costs allocated to Class A common stock | |
| (19,627,833 | ) |
Plus: | |
| | |
Adjust carrying value to initial redemption value | |
| 37,165,333 | |
Class A common stock subject to possible redemption | |
$ | 290,375,000 | |
Note
7 — Stockholders’ Deficit
Preferred
Stock — The Company is authorized to issue 1,000,000 shares of preferred stock, par value $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 March 31, 2022 and December 31, 2021, there were no shares of preferred stock issued or outstanding.
Class A
Common Stock — The Company is authorized to issue 500,000,000 shares of Class A common stock with a
par value of $0.0001 per share. As of March 31, 2022 and December 31, 2021, there were 28,750,000 shares of Class A
common stock issued and outstanding, all of which were subject to possible redemption and were classified outside of permanent equity
in the accompanying condensed balance sheets (see Note 6).
Class B
Common Stock — The Company is authorized to issue 50,000,000 shares of Class B common stock with a
par value of $0.0001 per share. As of March 31, 2022 and December 31, 2021, there were 7,187,500 shares of Class B
common stock issued and outstanding. Of the 7,187,500 shares of Class B common stock outstanding, up to 937,500 shares
of Class B common stock were subject to forfeiture. The over-allotment option was exercised in full, therefore shares of Class B common
stock were no longer subject to forfeiture.
Common
stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders and vote together as
a single class, except as required by law; provided, that, prior to the Company’s initial Business Combination, holders of the
Class B common stock will have the right to appoint all of the Company’s directors and remove members of the board of directors
for any reason, and holders of the Class A common stock will not be entitled to vote on the appointment of directors during such
time.
The
Class B common stock will automatically convert into Class A common stock at the time of the initial Business Combination,
or earlier at the option of the holder, on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations,
recapitalizations and the like, and subject to further adjustment as provided herein. In the case that additional shares of Class A
common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts issued in the Initial Public Offering
and related to the closing of the initial Business Combination, the ratio at which the shares of Class B common stock will convert
into shares of Class A common stock will be adjusted (unless the holders of a majority of the issued and outstanding shares of the
Class B common stock agree to waive such anti-dilution 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 all shares of common stock issued and 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 initial Business Combination, excluding any shares or equity-linked securities issued, or to be issued, to
any seller in the initial Business Combination.
Warrants —
As of March 31, 2022 and December 31, 2021, the Company had an aggregate of 25,500,000 warrants outstanding, comprised of 14,375,000 and 11,125,000 Public
Warrants and Private Placement Warrants, respectively. Public Warrants may only be exercised for a whole number of shares. No fractional
Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become
exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of
the Initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act
covering the shares of Class A common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them
is available (or the Company permits holders to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt
from registration under the Securities Act). The Company agreed that as soon as practicable, but in no event later than 20 business days
after the closing of its initial Business Combination, the Company will use its commercially reasonable efforts to file with the SEC
and have an effective registration statement covering the shares of Class A common stock issuable upon exercise of the warrants
and will use its commercially reasonable efforts to cause the same to become effective within 60 business days after the closing of the
Company’s initial Business Combination and to maintain a current prospectus relating to those shares of Class A common stock
until the warrants expire or are redeemed. If the shares issuable upon exercise of the warrants are not registered under the Securities
Act in accordance with the above requirements, the Company will be required to permit holders to exercise their warrants on a cashless
basis. However, no warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares
to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under
the securities laws of the state of the exercising holder, or an exemption from registration is available. Notwithstanding the above,
if the Company’s shares of Class A common stock are at the time of any exercise of a warrant not listed on a national securities
exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act,
the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a cashless basis in accordance
with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, it will not be required to file or maintain
in effect a registration statement, and in the event the Company does not so elect, it will use its commercially reasonable efforts to
register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
The
warrants have an exercise price of $11.50 per share, subject to adjustments, and will expire five years after the completion of
a Business Combination or earlier upon redemption or liquidation. In addition, if (x) the Company issues additional shares
of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of the initial
Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with
such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of
any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates,
as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances
represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination
on the date of the completion of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading
price of the Class A common stock during the 20 trading day period starting on the trading day prior to the day on which the Company
completes the initial Business Combination (such price, the “Market Value”) is below $9.20 per share, then the exercise price
of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price,
the $18.00 per share redemption trigger prices described below under “Redemption of warrants when the price per share of Class A
common stock equals or exceeds $18.00” to be equal to 180% of the higher of the Market Value and the Newly Issued Price described
below under “Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00” will
be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
The
Private Placement Warrants will be non-redeemable and will be exercisable on a cashless basis at the option of the holder.
Redemption
of Public Warrants when the price per share of Class A common stock equals or exceeds $18.00: Once the
warrants become exercisable, the Company may call the outstanding warrants for redemption (except as described herein with respect to
the Private Placement Warrants):
|
● |
in
whole and not in part; |
|
● |
at
a price of $0.01 per warrant; |
|
● |
upon
a minimum of 30 days’ prior written notice of redemption to each warrant holder; and |
| ● | if, and only if, the last reported sale price of Class A common stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted). |
Unless
the Company has elected to require Public Warrant holders to exercise such warrants on a cashless basis, the Company will not redeem
the Public Warrants as described above unless a registration statement under the Securities Act covering the issuance of the shares of
Class A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares
of Class A common stock is available throughout the 30-day redemption period. If and when the Public Warrants become redeemable
by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for
sale under all applicable state securities laws.
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
The
following table presents information about the Company’s assets that are measured at fair value on a recurring basis as of March
31, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine
such fair value.
Description | |
Level 1 | | |
Level 2 | | |
Level 3 | |
March 31, 2022 - Assets: | |
| | | |
| | | |
| | |
Investments held in Trust Account | |
$ | 290,403,502 | | |
$ | - | | |
$ | - | |
December 31, 2021 - Assets: | |
| | | |
| | | |
| | |
Investments held in Trust Account | |
$ | 290,375,895 | | |
$ | - | | |
$ | - | |
Transfers
to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. There were no transfers between
levels for the period from March 23, 2021 (inception) through March 31, 2022.
Level 1
assets include investments in money market funds or 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.
Note 9
— Subsequent Events
The
Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed financial
statements were issued. Based upon this review, the Company did not identify any other subsequent events that would have required adjustment
or disclosure in the condensed financial statements.