NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2022
Note
1 — Organization and Business Operations
Organization
and General
Mission
Advancement Corp. was incorporated in Delaware on December 22, 2020. The Company was formed for the purpose of entering into a business
combination. The Company is not limited to a particular industry or geographic region for purposes of consummating a 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 June 30, 2022, the Company had not yet engaged in any operations or generated any revenues to date. All activity through June 30, 2022,
relates to the Company’s formation and the initial public offering (described below) and identifying a target company for our initial
business combination. The Company will not generate any operating revenues until after the completion of its initial business combination,
at the earliest. The Company generates non-operating income in the form of interest income on cash and cash equivalents from the proceeds
derived from the IPO.
Financing
The
registration statement for the Company’s IPO was declared effective on March 2, 2021. On March 5, 2021, the Company consummated
the IPO of 34,500,000 units, at $10.00 per unit, generating gross proceeds of $345,000,000, which is discussed in Note
3.
Simultaneously
with the closing of the IPO, the Company consummated the sale of 5,933,333 private placement warrants, at a price of $1.50 per
private placement warrant, which is discussed in Note 4.
Transaction
costs amounted to $19,634,742 consisting of $6,900,000 of underwriting fee, $12,075,000 of deferred underwriting fee and
$659,742 of other offering costs. Of the total transaction costs $864,511 was expensed as non-operating expenses in the statements
of operations with the rest of the offering cost charged to temporary equity. The transaction costs were allocated based on the relative
fair value basis, compared to the total offering proceeds, between the fair value of the public warrant liabilities and the Class A common
stock.
Trust
Account
Following
the closing of the IPO on March 5, 2021, an amount of $345,000,000 from the net proceeds of the sale of the units in the IPO and
the sale of the private placement warrants was placed in the trust account, which is invested in U.S. government securities, within
the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less or in any open-ended investment
company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined
by the Company. Except with respect to interest earned on the funds held in the trust account that may be released to the Company to pay
its tax obligations, the proceeds from the IPO and the sale of the private placement units will not be released from the trust account
until the earliest of (a) the completion of the Company’s initial business combination, (b) the redemption of any public shares
properly submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation,
and (c) the redemption of the Company’s public shares if the Company is unable to complete the initial business combination within
24 months from the closing of the IPO, subject to applicable law. The proceeds deposited in the trust account could become subject to
the claims of the Company’s creditors, if any, which could have priority over the claims of the Company’s public stockholders.
Initial Business Combination
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO, although substantially
all of the net proceeds are intended to be generally applied toward consummating a business combination.
The
Company’s business combination must be with one or more target businesses that together have a fair market value equal to at least 80%
of the balance in the trust account (net of taxes payable) at the time of the signing an agreement to enter into a business combination.
However, the Company will only complete a business combination if the post-business combination 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. There is no assurance that the Company will be able
to successfully effect a business combination.
The
Company will provide its public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion
of the initial business combination either (i) in connection with a stockholder meeting called to approve the initial business combination
or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a proposed initial business
combination or conduct a tender offer will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem
their shares for a pro rata portion of the amount then on deposit in the trust account (initially $10.00 per share, plus any pro
rata interest earned on the funds held in the trust account and not previously released to the Company to pay its tax obligations).
The
shares of common stock subject to redemption is recorded at a redemption value and classified as temporary equity upon the completion
of the IPO, in accordance with ASC Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”). In such case,
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 consummation of a business combination and, if the Company seeks stockholder approval, a majority of the issued and outstanding
shares voted are voted in favor of the business combination.
The
Company has until March 5, 2023, 24 months from the closing of the IPO, to consummate a business combination. However, if the Company
is unable to complete a business combination within the Combination Period, the Company will redeem 100% of the outstanding public
shares for a pro rata portion of the funds held in the trust account, 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, divided by the number of
then outstanding public shares, subject to applicable law and as further described in the registration statement, and then seek to dissolve
and liquidate.
The Company’s sponsor,
Mission Advancement Sponsor LLC, officers and directors have agreed to (i) waive their redemption rights with respect to their (x) founder
shares, (y) shares underlying their private placement warrants (“private placement shares”) and (z) public shares in connection
with the completion of the initial business combination, (ii) waive their redemption rights with respect to their founder shares and public
shares in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation,
and (iii) waive their rights to liquidating distributions from the trust account with respect to their founder shares and private placement
shares if the Company fails to complete the initial business combination within the Combination Period.
The
Company’s sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services
rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of
intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below
the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the trust account as of the date of
the liquidation of the trust account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes
payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver
of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims
under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities
Act. However, the Company has not asked its sponsor to reserve for such indemnification obligations, nor has the Company independently
verified whether its sponsor has sufficient funds to satisfy its indemnity obligations and believe that the Company’s sponsor’s
only assets are securities of the Company. Therefore, the Company cannot assure that its sponsor would be able to satisfy those obligations.
Liquidity
and Capital Resources
As
of June 30, 2022, the Company had cash outside the trust account of $86,152 available for working capital needs, respectively. As of June
30, 2022, $100,744 in the trust account was withdrawn to pay taxes. As of June 30, 2022, all remaining cash held in the trust account
is generally unavailable for the Company’s use, prior to an initial business combination, and is restricted for use either in a
business combination or to redeem common stock.
Through
June 30, 2022, the Company’s liquidity needs were satisfied through receipt of $25,000 from the sale of the founder shares
and the remaining net proceeds from the IPO and the sale of private placement warrants.
Going
Concern
The
Company anticipates that the $86,152 held outside of the trust account as of June 30, 2022, might not be sufficient to allow the
Company to operate until March 5, 2023, the end of the Combination Period, assuming that a business combination is not consummated during
that time. Until consummation of its business combination, the Company will be using the funds not held in the trust account, and any
additional Working Capital Loans from the initial stockholders, the Company’s officers and directors, or their respective affiliates
(which is described in Note 5), for identifying and evaluating prospective acquisition candidates, performing business due diligence on
prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing
corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring,
negotiating and consummating the business combination.
The
Company can raise additional capital through Working Capital Loans from the initial stockholders, the Company’s officers, directors,
or their respective affiliates (which is described in Note 5), or through loans from third parties. None of the sponsor, officers or directors
are under any obligation to advance funds to, or to invest in, the Company. If the Company is 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 its business plan, 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 for a reasonable period of time, which is considered to be one year from the issuance date of the
financial statements.
The
Company has until March 5, 2023, 24 months from the closing of the IPO, to consummate a business combination. It is uncertain that we
will be able consummate a business combination within the Combination Period. If a business combination is not consummated within the
Combination Period, there will be a mandatory liquidation and subsequent dissolution. In connection with the Company’s assessment
of going concern considerations in accordance with the authoritative guidance ASU Topic 2014-15, “Disclosure of Uncertainties About
an Entity’s Ability to Continue as a Going Concern”, management has determined that mandatory liquidation, and subsequent
dissolution, should the Company be unable to complete a business combination, raises substantial doubt about the Company’s ability
to continue as a going concern. No adjustments have been made to the carrying amounts of assets and liabilities should the Company be
required to liquidate after March 5, 2023.
Risks
and Uncertainties
Management
is currently evaluating the impact of the COVID-19 pandemic and the Russia-Ukraine war and has concluded that while it is reasonably possible
that the virus and war could have a negative effect on the Company’s financial position, results of its operations and/or search
for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements.
The accompanying unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note
2 — Significant Accounting Policies
Basis
of Presentation
The
accompanying unaudited condensed financial statements have been prepared in accordance with US GAAP for interim financial information
and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Certain information or footnote disclosures
normally included in unaudited condensed financial statements prepared in accordance with US GAAP have been condensed or omitted, pursuant
to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes
necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying
unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair
presentation of the financial position, operating results and cash flows for the periods presented.
The
accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Form 10-K for the year ended
December 31, 2021 as filed with the SEC on April 1, 2022, which contains the audited financial statements and notes thereto. The interim
results for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending
December 31, 2022 or for any future interim periods.
Emerging Growth Company Status
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by 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, 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 a company can elect to opt out of the extended transition period and comply with the requirements that apply
to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended
transition period which means that when a standard is issued or revised and it has different application dates for public or private companies,
the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised
standard. This may make comparison of the Company’s unaudited condensed financial statements with another public company which is
neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult
or impossible because of the potential differences in accounting standards used.
Use of
Estimates
The
preparation of unaudited condensed financial statements in conformity with US GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited
condensed financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those
estimates.
Marketable
Securities Held in Trust Account
At
June 30, 2022 and December 31, 2021, the trust account had $345,392,350 and $345,018,988 held in marketable securities, respectively.
During the six months ended June 30, 2022, and 2021, the Company withdrew $100,744 and $0 from the trust account to pay its
tax obligations, respectively. Marketable securities held in trust account are classified as “Held-for-Trading Securities”
and are reported at fair value with unrealized gains or losses included in earnings of the current period.
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. Class A common
stock subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally
redeemable common stock (including 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, common stock is classified as stockholders’ deficit. The Company’s common stock 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 June 30, 2022 and December 31, 2021, 34,500,000 shares of Class A common stock subject to possible redemption are presented
at redemption value as temporary equity, outside of the stockholders’ deficit section of the Company’s balance sheet.
Net Income
per Common Stock
The
Company complies with accounting and disclosure requirements ASC Topic 260, “Earnings Per Share.” The Company’s statements
of operations include a presentation of income per share for Class A common stock subject to possible redemption in a manner similar to
the two-class method of income per share. The contractual formula utilized to calculate the redemption amount approximates fair value.
The Class A common stock feature to redeem at fair value means that there is effectively only one class of stock. Changes in fair value
are not considered a dividend of the purposes of the numerator in the earnings per share calculation. Net income per share is computed
by dividing the pro rata net income between the Class A shares and the Class B shares by the weighted average number of shares outstanding
for each of the periods. The calculation of diluted income per share does not consider the effect of the warrants and rights issued in
connection with the IPO since the exercise of the warrants and rights are contingent upon the occurrence of future events and the inclusion
of such warrants would be anti-dilutive.
The
Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock
and then share in the earnings of the Company. As a result, diluted income per share is the same as basic income per share for the period
presented.
Below is
a reconciliation of the net income per common stock:
| |
For the Three Months Ended June 30, | |
| |
2022 | | |
2021 | |
Redeemable Class A common stock | |
| | |
| |
Numerator: | |
| | |
| |
Net income allocable to Class A common stock subject to possible redemption | |
$ | 2,148,546 | | |
$ | 6,986,634 | |
Denominator: | |
| | | |
| | |
Weighted average redeemable Class A common stock, Basic and Diluted | |
| 34,500,000 | | |
| 34,500,000 | |
Basic and diluted net income per share, redeemable Class A common stock | |
$ | 0.06 | | |
$ | 0.20 | |
| |
| | | |
| | |
Non-redeemable common stock | |
| | | |
| | |
Numerator: | |
| | | |
| | |
Net income allocable to non-redeemable Class B common stock | |
$ | 537,137 | | |
$ | 1,746,659 | |
Denominator: | |
| | | |
| | |
Weighted average non-redeemable Class B common stock | |
| 8,625,000 | | |
| 8,625,000 | |
Basic and diluted net income per share, non-redeemable Class B common stock | |
$ | 0.06 | | |
$ | 0.20 | |
| |
For the Six Months Ended June 30, | |
| |
2022 | | |
2021 | |
Redeemable Class A common stock | |
| | |
| |
Numerator: | |
| | |
| |
Net income allocable to Class A common stock subject to possible redemption | |
$ | 5,932,990 | | |
$ | 5,166,905 | |
Denominator: | |
| | | |
| | |
Weighted average redeemable Class A common stock, Basic and Diluted | |
| 34,500,000 | | |
| 22,425,000 | |
Basic and diluted net income per share, redeemable Class A common stock | |
$ | 0.17 | | |
$ | 0.23 | |
| |
| | | |
| | |
Non-redeemable common stock | |
| | | |
| | |
Numerator: | |
| | | |
| | |
Net income allocable to non-redeemable Class B common stock | |
$ | 1,483,247 | | |
$ | 1,800,545 | |
Denominator: | |
| | | |
| | |
Weighted average non-redeemable Class B common stock | |
| 8,625,000 | | |
| 7,814,583 | |
Basic and diluted net income per share, non-redeemable Class B common stock | |
$ | 0.17 | | |
$ | 0.23 | |
Offering
Costs
The
Company complies with the requirements of the ASC Topic 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A, “Expenses of Offering”.
Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the
initial public offering and that were charged to stockholders’ deficit upon the completion of the IPO. Accordingly, on March 5,
2021, offering costs totaling $19,634,742 have been charged to temporary equity (consisting of $6,900,000 of underwriting fee,
$12,075,000 of deferred underwriting fee and $659,742 of other offering costs). Of the total transaction costs $864,511 was
reclassed to expense as a non-operating expense in the statements of operations with the rest of the offering cost charged to temporary
equity. The transaction costs were allocated based on the relative fair value basis, compared to the total offering proceeds, between
the fair value of the public warrant liabilities and the Class A common stock.
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under the ASC Topic 820, “Fair
Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet.
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”. US 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”. |
Derivative
Warrant Liabilities
The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates
all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain
features that qualify as embedded derivatives, pursuant to ASC 480 and ASC Topic 815-15, “Derivatives and Hedging”. 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
Company accounts for its 17,433,333 common stock warrants issued in connection with its IPO 11,500,000 and private placement
5,933,333 as derivative warrant liabilities in accordance with ASC Topic 815-40, “Derivatives and Hedging”. Accordingly, the
Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period.
The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in
the Company’s statements of operations. At the IPO, the Company utilized a Monte Carlo simulation model to determine the initial
value of the public warrants and private placement warrants. At June 30, 2022 and December 31, 2021, the Company used the quoted stock
price in the active market to value the public warrants and a Monte Carlo simulation model to value the private placement warrants with
changes in fair value charged to the statements of operations.
Income
Taxes
The
Company accounts for income taxes under ASC Topic 740, “Income Taxes” (“ASC 740”). ASC 740 requires the recognition
of deferred tax assets and liabilities for both the expected impact of differences between the unaudited condensed financial statements
and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards.
ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred
tax assets will not be realized. As of June 30, 2022 and December 31, 2021, the Company’s deferred tax asset had a full valuation
allowance recorded against it.
ASC
740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes
a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected
to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination
by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in annual period,
disclosure and transition.
ASC
740-270-25-2 requires that an annual effective tax rate be determined and such annual effective rate applied to year to date income in
interim periods under ASC 740-270-30-5. Our effective tax rate was 1.52% and 0.00% for the three months ended June 30, 2022, and 2021,
respectively, and 0.56% and 0.00% for the six months ended June 30, 2022, and 2021, respectively. The effective tax rate differs from
the statutory tax rate of 21% for the three and six months ended June 30, 2022, and 2021, due to changes in fair value in warrant liability
and the valuation allowance on the deferred tax assets.
The
Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized
tax benefits and no amounts accrued for interest and penalties as of June 30, 2022, and December 31, 2021. The Company is currently not
aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The
Company may be subject to potential examination by federal and state taxing authorities in the areas of income taxes. These potential
examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance
with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will
materially change over the next twelve months.
Recent
Accounting Standards
The
Company’s management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted
would have a material effect on the accompanying financial statements.
Note
3 — Initial Public Offering
Pursuant
to the IPO, the Company sold 34,500,000 units, (at a price of $10.00 per unit). Each unit consists of one share of Class
A common stock, par value $0.0001 per share and one-third of one 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.
Note
4 — Private Placement Warrants
Simultaneously
with the closing of the IPO, the sponsor purchased an aggregate of 5,933,333 private placement warrants at a price of $1.50 per
warrant ($8,900,000 in the aggregate), each private placement warrant is exercisable to purchase one share of Class A common stock
at a price of $11.50 per share. A portion of the purchase price of the private placement warrants was added to the proceeds from
the IPO being held in the trust account.
The
private placement warrants will not be redeemable by the Company so long as they are held by the initial purchasers or their permitted
transferees. The initial purchasers, or their permitted transferees, have the option to exercise the private placement warrants on a cashless
basis. If the private placement warrants are held by holders other than initial purchasers or their permitted transferees, the private
placement warrants will be redeemable by the Company and exercisable by the holders on the same basis as the warrants included in the
units sold in the initial public offering. Otherwise, the private placement warrants have terms and provisions that are identical to those
of the warrants being sold as part of the units in the initial public offering.
Note
5 — Related Party Transactions
Founder
Shares
On
December 22, 2020, the sponsor paid $25,000, or approximately $0.003 per share, to cover certain offering costs in consideration
for the founder shares, 7,187,500 shares of Class B common stock, par value $0.0001 . On March 2, 2021, the Company
effected a stock dividend of approximately 0.2 shares for each share of Class B common stock outstanding, resulting in the sponsor
holding on aggregate of 8,625,000 founder shares.
The
Company’s initial stockholders have agreed not to transfer, assign or sell any of their founder shares until the earlier to occur
of (A) one year after the completion of the Company’s initial business combination and (B) the date on which the Company
completes a liquidation, merger, capital stock exchange or other similar transaction after the Company’s initial business combination
that results in all of the Company’s stockholders having the right to exchange their Class A common stock for cash, securities
or other property; except to certain permitted transferees and under certain circumstances. Any permitted transferees will be subject
to the same restrictions and other agreements of the Company’s initial stockholders with respect to any founder shares. The Company
refers to such transfer restrictions as the “lock-up”. Notwithstanding the foregoing, the founder shares will be released
from the lockup if the closing price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted
for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading
day period commencing at least 150 days after the company’s initial business combination.
On
February 11, 2021, the Sponsor transferred 265,000 founder shares to fifteen (15) of the Company’s directors and advisors in
recognition of and compensation for their future services to the Company. The assignment of the founders shares to the Company’s
directors and advisors is within the scope of 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 fair value
of the 265,000 founder shares granted to the Company’s directors and advisors was $1,648,300 or $6.22 per share. The
founder shares were effectively assigned to the directors and advisors subject to a performance condition (i.e., the consummation of a
business combination). Compensation expense related to the founder shares is recognized only when the performance condition is probable
of achievement under the applicable accounting literature. Stock-based compensation would be recognized at the date a business combination
is considered probable in an amount equal to the number of founder shares times the grant date fair value per share (unless subsequently
modified) less the amount initially received for the purchase of the founder shares. As of June 30, 2022 and December 31, 2021, the Company
has not yet entered into any definitive agreements in connection with any business combination. Any such agreements may be subject to
certain conditions to closing, such as, for example, approval by the Company’s stockholders. As a result, the Company determined
that the consummation of a business combination is not considered probable, and, therefore, no stock-based compensation expense has been
recognized.
Promissory Note —
Related Party
On
December 22, 2020, the sponsor agreed to loan the Company up to $300,000 to be used for a portion of the expenses of the IPO. These
loans were non-interest bearing, unsecured and were due at the earlier of June 30, 2022 or the closing of the IPO. As of June 30, 2022
and December 31, 2021, the Company had no outstanding borrowings under the promissory note.
Working
Capital Loans
In
addition, in order to finance transaction costs in connection with a business combination, the initial stockholders or an affiliate of
the initial stockholders or certain of the Company’s directors and officers may, but are not obligated to, loan the Company Working
Capital Loans. If the Company completes a business combination, the Company would repay the Working Capital Loans out of the proceeds
of the trust account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the
trust account. In the event that a business combination does not close, the Company may use a portion of proceeds held outside the trust
account to repay the Working Capital Loans, but no proceeds held in the trust account would be used to repay the Working Capital Loans.
Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with
respect to such loans. The Working Capital Loans would either be repaid upon consummation of a business combination, without interest,
or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post-business
combination entity at a price of $1.50 per warrant. The warrants would be identical to the private placement warrants.
On
December 1, 2021, the Company issued the Note, a promissory note in the principal amount of up to $1,500,000 to the sponsor. The
Note was issued in connection with advances the sponsor has made, and may make in the future, to the Company for working capital expenses.
The Note bears no interest and is due and payable upon the earlier to occur of (i) the date on which the Company consummates its initial
business combination and (ii) the date of the liquidation of the Company. At the election of the sponsor, all or a portion of the unpaid
principal amount of the Note may be converted into warrants of the Company, each warrant exercisable for one share of Class
A common stock of the Company upon the consummation of an initial business combination (the “Conversion Warrants”), equal
to: (x) the portion of the principal amount of the Note being converted, divided by (y) $1.50, rounded up to the nearest whole number
of warrants. The Conversion Warrants are identical to the warrants issued by the Company to the Sponsor in a private placement in connection
with the Company’s IPO. The Conversion Warrants and their underlying securities are entitled to the registration rights set forth
in the Note. As of June 30, 2022 and December 31, 2021, the outstanding balance of the Note was $950,000 and $550,000, respectively.
The
conversion feature included in the Note is considered an embedded derivate and is remeasured at the end of each reporting period. The
value is de minimis.
Administrative
Support Agreement
Commencing
on the date of the IPO, the Company has agreed to pay the sponsor a total of $10,000 per month for office space and administrative
support services. Upon completion of the initial business combination or the Company’s liquidation, the Company will cease paying
these monthly fees. The Company incurred $30,000 for the three months ended June 30, 2022 and 2021. The Company incurred $60,000 and
$39,677 for the six months ended June 30, 2022 and 2021, respectively.
Note
6 — Commitments & Contingencies
Registration
Rights
The
holders of the founder shares, private placement warrants and warrants that may be issued upon conversion of Working Capital Loans (and
any Class A common stock issuable upon the exercise of the private placement warrants and warrants issued upon conversion of the
Working Capital Loans) will be entitled to registration rights pursuant to a registration rights agreement that was signed prior to or
on the effective date of the IPO. The holders of these securities are entitled to make up to three demands, excluding short form demands,
that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect
to registration statements filed subsequent to consummation of a business combination. However, the registration rights agreement provides
that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the
applicable lockup period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriters
Agreement
On
March 5, 2021, the Company paid a fixed underwriting discount of $0.20 per unit, or $6,900,000 in the aggregate. Additionally, a deferred
underwriting discount of $0.35 per unit, or $12,075,000 in the aggregate, will be payable to the underwriters from the amounts held in
the trust account solely in the event that the Company completes an initial business combination, subject to the terms of the underwriting
agreement.
Note
7 — Stockholders’ Equity (Deficit)
Preferred
Stock
The
Company is authorized to issue a total of 1,000,000 shares of preferred stock at par value of $0.0001 each. As of June
30, 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 a total of 300,000,000 shares of Class A common stock at par value of $0.0001 each. As of
June 30, 2022 and December 31, 2021, there were no shares issued and outstanding (excluding 34,500,000 shares subject
to possible redemption).
Class
B Common Stock
The
Company is authorized to issue a total of 20,000,000 shares of Class B common stock at par value of $0.0001 each. As of
June 30, 2022 and December 31, 2021, there were 8,625,000 shares of Class B common stock issued or outstanding.
Holders
of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to
a vote of the Company’s stockholders except as required by law. Unless specified in the Company’s amended and restated certificate
of incorporation, or as required by applicable provisions of the DGCL or applicable stock exchange rules, the affirmative vote of a majority
of the Company’s shares of common stock that are voted is required to approve any such matter voted on by its stockholders.
The
Class B common stock will automatically convert into Class A common stock upon the consummation of the initial business combination
on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and
subject to further adjustment. In the case that additional shares of Class A common stock or equity-linked securities are issued
or deemed issued in connection with the initial business combination, the number of Class A common stock issuable upon conversion
of all founder shares will equal, in the aggregate, on an as-converted basis, 20% of the total number of shares of Class A common
stock outstanding after such conversion, including the total number of shares of Class A common stock issued, or deemed issued or
issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with
or in relation to the consummation of the initial business combination, excluding any shares of Class A common stock or equity-linked
securities or rights exercisable for or convertible into shares of Class A common stock issued, or to be issued, to any seller in
the initial business combination and any private placement warrants issued to the sponsor, officers or directors upon conversion of Working
Capital Loans; provided that such conversion of founder shares will never occur on a less than one-for-one basis.
Note 8 — Warrants
Each
whole warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment
as discussed below, at any time commencing on the later of 12 months from the closing of the IPO and 30 days after the completion
of the initial business combination, 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 warrants and a current prospectus relating to them
is available (or the Company permits holders to exercise their warrants on a cashless basis under the circumstances specified in the warrant
agreement) and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state
of residence of the holder. The warrants will expire five years after the completion of the Company’s initial business
combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The
Company has agreed that as soon as practicable, but in no event later than fifteen (15) business days after the closing of the initial
business combination, it will use its best efforts to file with the SEC a registration statement for the registration, under the Securities
Act, of the Class A common stocks issuable upon exercise of the warrants. The Company will use its 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 or redemption of the warrants in accordance with the provisions of the warrant agreement. If a registration statement covering
the shares of Class A common stock issuable upon exercise of the warrants is not effective by the sixtieth (60th) business
day after the closing of the initial business combination, warrant holders may, until such time as there is an effective registration
statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on
a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the
above, if the Company’s 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 best efforts to register
or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Once
the warrants become exercisable, the Company may call the warrants for redemption for cash:
| ● | in whole and not in part; |
| | |
| ● | at a price of $0.01 per warrant; |
| | |
| ● | upon not less than 30 days’ prior written notice of redemption to each warrant holder; and |
| | |
| ● | if, and only if, the closing price of the common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once the warrants become exercisable and ending three business days before the Company sends to the notice of redemption to the warrant holders. |
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 its 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 initial stockholders or their affiliates, without taking into account
any founder shares held by the initial stockholders 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 consummation of the initial business combination
(net of redemptions), and (z) the volume weighted average trading price of the Company’s Class A common stock during the
20 trading day period starting on the trading day after the day on which it consummates its initial business combination (such price,
the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to
be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described
above will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
Note
9 — 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. US 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. |
The
following table presents information about the Company’s assets that are measured at fair value on a recurring basis at June 30,
2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair
value:
| |
June 30,
2022 | | |
Quoted Prices In Active Markets (Level 1) | | |
Significant Other Observable Inputs (Level 2) | | |
Significant Other Unobservable Inputs (Level 3) | |
Description | |
| | |
| | |
| | |
| |
Assets: | |
| | |
| | |
| | |
| |
Mutual Funds held in trust account | |
$ | 345,392,350 | | |
$ | 345,392,350 | | |
$ | — | | |
$ | — | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Warrant liabilities | |
| 1,454,108 | | |
| 948,750 | | |
| — | | |
| 505,358 | |
| |
$ | 346,846,458 | | |
$ | 346,341,100 | | |
$ | — | | |
$ | 505,358 | |
| |
December 31,
2021 | | |
Quoted Prices In Active Markets (Level 1) | | |
Significant Other Observable Inputs (Level 2) | | |
Significant Other Unobservable Inputs (Level 3) | |
Description | |
| | |
| | |
| | |
| |
Assets: | |
| | |
| | |
| | |
| |
Mutual Funds held in trust account | |
$ | 345,018,988 | | |
$ | 345,018,988 | | |
$ | — | | |
$ | — | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Warrant liabilities | |
| 9,089,893 | | |
| 5,863,850 | | |
| — | | |
| 3,226,043 | |
| |
$ | 354,108,881 | | |
$ | 350,882,838 | | |
$ | — | | |
$ | 3,226,043 | |
At
June 30, 2022 and December 31, 2021, the Company use the quoted stock price in the active market to value the public warrants and a Monte
Carlo simulation model to value the private placement warrants with changes in fair value charged to the statements of operations. The
estimated fair value of the private placement warrant liability is determined using Level 3 inputs. Inherent in a binomial options
pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The
Company estimates 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 is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar
to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual
term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.
Transfers
to/from Levels 1, 2 and 3 are recognized at the end of the reporting period. There were no transfers between levels for the three and
six months ended June 30, 2022. During the year ended December 31, 2021, there was a transfer of the public warrants from Level 3
to Level 1 due to a valuation of the public warrants using the quoted stock price in the active market.
The
following table provides quantitative information regarding assumptions used to determine Level 3 fair value measurements:
| |
At
June 30,
2022 | | |
At
December 31,
2021 | |
Stock price | |
$ | 9.78 | | |
$ | 9.73 | |
Strike price | |
$ | 11.50 | | |
$ | 11.50 | |
Term (in years) | |
| 5.67 | | |
| 5.91 | |
Volatility | |
| 7.1 | % | |
| 9.5 | % |
Risk-free rate | |
| 3.02 | % | |
| 1.34 | % |
Dividend yield | |
| 0 | % | |
| 0 | % |
The
following table provides a reconciliation of changes in fair value of the beginning and ending balances for our assets and liabilities
classified as level 3 (private placement warrants):
| |
Warrant | |
| |
Liability | |
Fair value at January 1, 2022 | |
$ | 3,226,043 | |
Change in fair value | |
| (1,848,252 | ) |
Fair value at March 31, 2022 | |
| 1,377,791 | |
Change in fair value | |
| (872,433 | ) |
Fair value at June 30, 2022 | |
$ | 505,358 | |
| |
Warrant Liability | |
Fair value at January 1, 2021 | |
$ | — | |
Initial value at IPO date | |
| 23,290,337 | |
Change in fair value | |
| 637,123 | |
Fair value at March 31, 2021 | |
| 23,927,460 | |
Transfer of public warrants from level 3 to level 1 | |
| (15,595,052 | ) |
Change in fair value | |
| (2,692,406 | ) |
Fair value at June 30, 2021 | |
$ | 5,640,002 | |
Note
10 — Subsequent Events
The
Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date that the unaudited condensed
financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required
adjustment or disclosure in the financial statements.