Special Note Regarding Forward-Looking Statements
References to the "Company," "our," "us" or "we" refer to Dune Acquisition Corp.
The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the unaudited condensed
consolidated financial statements and the notes thereto contained elsewhere in
this report. Certain information contained in the discussion and analysis set
forth below includes forward-looking statements that involve risks and
uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). We have based these forward-looking statements on our current
expectations and projections about future events. These forward-looking
statements are subject to known and unknown risks, uncertainties and assumptions
about us that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Such statements include, but are not limited
to, possible business combinations and the financing thereof, and related
matters, as well as all other statements other than statements of historical
fact included in this Form 10-Q. Factors that might cause or contribute to such
a discrepancy include, but are not limited to, those described in our other
Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated in Delaware on June 18, 2020 for the
purpose of effecting a merger, capital stock exchange, asset acquisition, stock
purchase, reorganization or similar business combination with one or more
businesses. Our Sponsor is Dune Acquisition Holdings LLC, a Delaware limited
liability company.
The registration statement for our initial public offering became effective on
December 17, 2020. On December 22, 2020, we consummated the initial public
offering of 17,250,000 units, including 2,250,000 additional units to cover the
over-allotment units, at $10.00 per unit, generating gross proceeds of $172.5
million, and incurring offering costs of approximately $10.0 million, inclusive
of approximately $6.0 million in deferred underwriting commissions.
Simultaneously with the closing of the initial public offering, we consummated
the private placement of 4,850,000 private placement warrants at a price of
$1.00 per private placement warrant to our Sponsor, generating proceeds of
approximately $4.9 million.
Upon the closing of the initial public offering and the private placement,
$172.5 million ($10.00 per unit) of the net proceeds of the initial public
offering and certain of the proceeds of the private placement was held in the
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, 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.
If we are unable to complete a business combination within 18 months from the
closing of the initial public offering, or December 22, 2023, (the "Combination
Period") and our stockholders have not amended the Certificate of Incorporation
to extend such Combination Period, we 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), 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 our board of directors, liquidate and
dissolve, subject in each case to our obligations under Delaware law to provide
for claims of creditors and the requirements of other applicable law.
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June 14, 2022 Special Meeting of Stockholders
On June 14, 2022, Dune held the "Special Meeting. At the Special Meeting, Dune's
stockholders approved the Charter Amendment to extend the date by which Dune
must complete a business combination from June 22, 2022 to December 22, 2023.
In connection with Dune's Special Meeting, stockholders holding 16,409,033
public shares exercised their right to redeem such shares for a pro rata portion
of the funds held in the trust account, which would have resulted in (i)
approximately $164.1 million (approximately $10.00 per share) being removed from
the trust account to pay such holders, (ii) approximately $8.4 million remaining
in the trust account and (iii) 5,153,467 shares of common stock outstanding
(including 840,967 public shares and 4,312,500 Founder Shares (as defined in
Note 4)).
On June 15 and 16, 2022, Dune consented to requests to reverse the redemptions
of an aggregate of 341,087 public shares. As a result of such redemption
reversals, (i) stockholders holding an aggregate of 16,067,946 public shares
exercised and have not reversed their right to redeem such shares for a pro rata
portion of the funds held in the trust account, (ii) approximately $160.7
million (approximately $10.00 per share) will be removed from the trust account
to pay such holders, (iii) approximately $11.8 million remained in the trust
account and (iv) 5,494,554 shares of common stock will remain outstanding
(including 1,182,054 public shares and 4,312,500 Founder Shares).
Proposed Business Combination
On October 12, 2021, we entered into the Merger Agreement with Merger Sub,
Merger Sub II, and TradeZero. In accordance with the terms and subject to the
conditions of the Merger Agreement, at the Closing, (i) each issued and
outstanding share of TradeZero Common Stock will automatically be converted into
a number of shares of New TradeZero Common Stock equal to the Exchange Ratio,
which will be determined by dividing (A) the quotient of (x) $500,000,000
divided by (y) the number of shares of TradeZero Common Stock immediately prior
to the Closing (including the shares of TradeZero Common Stock subject to any
restricted stock unit awards of TradeZero) by (B) $10.00 per share, (ii) all of
the outstanding TradeZero restricted stock unit awards will be converted into
New TradeZero restricted unit awards on the same terms and conditions as the
existing awards (including with respect to vesting and acceleration, if any) to
be governed by the Incentive Plan, and with respect to a number of shares of New
TradeZero Common Stock equal to the product of (1) the number of shares of
TradeZero Common Stock underlying the original award and (2) the Exchange Ratio
and (iii) and all of the outstanding TradeZero stock option awards will be
converted into New TradeZero stock option awards on the same terms and
conditions as the existing award (including with respect to vesting and
acceleration, if any) to be governed by the Incentive Plan and with respect to a
number of shares of New TradeZero Common Stock equal to the product of (aa) the
number of shares of TradeZero Common Stock underlying the original award and
(bb) the Exchange Ratio and an exercise price per share of New TradeZero Common
Stock subject to the award equal to (i) the existing exercise price of the award
divided by (ii) the Exchange Ratio.
In addition, immediately prior to the Closing, holders of TradeZero Common Stock
immediately prior to Closing will receive a cash disbursement from TradeZero's
cash balance at Closing equal to the lesser of (a) the difference between
TradeZero's cash balance at Closing and $10,000,000 and (b) $30,000,000. On or
as soon as practicable following the Closing, New TradeZero will grant RSU Earn
Out Awards, and the holders of TradeZero Common Stock immediately prior to the
Closing and the holders of the RSU Earn Out Awards will have the right to
receive a pro rata share of up to 9,000,000 additional shares of New TradeZero
Common Stock upon the occurrence of certain earn-out triggering events, as
follows: (i) 3,000,000 shares upon the date on which the volume weighted average
closing sale price of the New TradeZero Common Stock as reported on the New York
Stock Exchange (or the stock exchange on which the New TradeZero Common Stock is
then listed) for a period of 20 trading days out of 30 consecutive trading days
(as equitably adjusted as appropriate to reflect any stock splits, reverse stock
splits, stock dividends (including any dividend or distribution of securities
convertible into New TradeZero Common Stock), extraordinary cash dividend,
reorganization, recapitalization, reclassification, combination, exchange of
shares or other like change or transaction with respect to New TradeZero Common
Stock) is equal to or greater than $12.00 per share at any time during the Earn
Out Period; (ii) 3,000,000 shares upon the date on which the Share Price is
equal to or greater than $15.00 per share during the Earn Out Period; and (iii)
3,000,000 shares upon the date on which the Share Price is equal to or greater
than $18.00 per share during the Earn Out Period.
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On January 26, 2022, we entered into the First Amendment with Merger Sub, Merger
Sub II and TradeZero. Pursuant to the First Amendment, the Merger Agreement was
amended to (i) clarify that, upon the occurrence of a sale during the Earn Out
Period of more than 50% of the total voting power of New TradeZero or all or
substantially all of the assets of New TradeZero, the dilutive effect of any
Earn Out Shares to be issued in connection with such sale must be taken into
account when calculating the Share Price to determine if any triggering events
for Earn Out Shares have been achieved, (ii) provide that if any Earn Out Shares
are forfeited pursuant to the terms of any applicable RSU Earn Out Awards, such
Earn Out Shares shall not be redistributed to the holders of TradeZero Common
Stock and (iii) clarify that each of Charter Amendment Proposal B and Charter
Amendment Proposal C from the Merger Agreement are not Condition Precedent
Proposals (as such term is defined in the Merger Agreement).
On July 13, 2022, we received the Purported Termination Notice from TradeZero.
On July 15, 2022, we sent a letter to TradeZero in response to the Purported
Termination Notice stating, among other things, that TradeZero is not permitted
to terminate the Merger Agreement because of TradeZero's breaches of, and
failure to perform under, the Merger Agreement. As a result, the Purported
Termination Notice is invalid and unenforceable, and TradeZero continues to be
bound to its obligations under the Merger Agreement in all respects.
For additional information regarding the Merger Agreement, see the Company's
Current Reports on Form 8-K filed by us on October 12, 2021, January 26, 2022
and July 15, 2022 and the Company's preliminary proxy statement (as amended),
initially filed with the SEC on January 26, 2022.
Liquidity and Going Concern
As of June 30, 2022, we had approximately $6,000 in our operating bank account
and a working capital deficit of approximately $2.9 million.
Our liquidity needs prior to the consummation of the initial public offering
were satisfied through the payment of $25,000 from the Sponsor to purchase
founders shares (as defined below), and loan proceeds from the Sponsor of
approximately $31,000 under the Note. We repaid the loan in full on December 22,
2020. Subsequent from the consummation of the initial public offering, our
liquidity has been satisfied through the net proceeds from the consummation of
the initial public offering and the private placement (as defined below) held
outside of the trust account.
In connection with our assessment of going concern considerations in accordance
with ASU 2014-15, "Disclosures of Uncertainties about an Entity's Ability to
Continue as a Going Concern," the Company has until December 22, 2023 to
consummate a business combination. It is uncertain that we will be able to
consummate a business combination by this time. If a business combination is not
consummated by this date, there will be a mandatory liquidation and subsequent
dissolution of the Company. Management has determined that the liquidity
condition and mandatory liquidation, should a business combination not occur,
and potential subsequent dissolution, raises substantial doubt about our ability
to continue as a going concern. Management intends to complete the business
combination prior to the liquidation date.
On June 14, 2022, Dune held the Special Meeting. At the Special Meeting, Dune's
stockholders approved the Charter Amendment to extend the date by which Dune
must complete a business combination from June 22, 2022 to December 22, 2023.
In connection with Dune's Special Meeting, stockholders holding 16,409,033
public shares exercised their right to redeem such shares for a pro rata portion
of the funds held in the trust account, which would have resulted in (i)
approximately $164.1 million (approximately $10.00 per share) being removed from
the trust account to pay such holders, (ii) approximately $8.4 million remaining
in the trust account and (iii) 5,153,467 shares of common stock outstanding
(including 840,967 public shares and 4,312,500 Founder Shares (as defined in
Note 4).
On June 15 and 16, 2022, Dune consented to requests to reverse the redemptions
of an aggregate of 341,087 public shares. As a result of such redemption
reversals, (i) stockholders holding an aggregate of 16,067,946 public shares
exercised and have not reversed their right to redeem such shares for a pro rata
portion of the funds held in the trust account, (ii) approximately $160.7
million (approximately $10.00 per share) was removed from the trust account to
pay such holders, (iii) approximately $11.8 million remained in the trust
account and (iv) 5,494,554 shares of common stock remained outstanding
(including 1,182,054 public shares and 4,312,500 Founder Shares).
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No adjustments have been made to the carrying amounts of assets or liabilities
should we be required to liquidate after December 22, 2023. We intend to
complete the proposed business combination before the mandatory liquidation
date. However, there can be no assurance that we will be able to consummate any
business combination by December 22, 2023.
Management continues to evaluate the impact of the COVID-19 pandemic and has
concluded that the specific impact is not readily determinable as of June 30,
2022 and December 31, 2021. The unaudited condensed consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Results of Operations
Our entire activity from inception through June 30, 2022 related to our
formation, the preparation for the initial public offering, and since the
closing of the initial public offering, the search for a prospective initial
business combination. We have neither engaged in any operations nor generated
any revenues to date. We will not generate any operating revenues until after
completion of our initial business combination. We will generate non-operating
income in the form of interest earned on cash equivalents held in trust account.
We expect to incur increased expenses as a result of being a public company (for
legal, financial reporting, accounting and auditing compliance), as well as for
due diligence expenses.
For the three months ended June 30, 2022, we had a net income of approximately
$7.4 million, which consisted of approximately $2.3 million in non-operating
gain from the change in fair value of derivative warrant liabilities,
approximately $6.0 million in non-operating gain from the forgiveness of
deferred underwriting commissions and income on investments held in trust
account of approximately $166,000, partially offset by approximately $1.0
million in general and administrative expenses, $30,000 in general and
administrative expenses - related party, approximately $50,000 in franchise tax
expenses and approximately $7,000 in income tax expenses.
For the three months ended June 30, 2021, we had a net loss of approximately
$2.7 million, which consisted of approximately $2.4 million in non-operating
loss from the change in fair value of derivative warrant liabilities,
approximately $230,000 in general and administrative expenses, $30,000 in
general and administrative expenses - related party, and approximately $50,000
in franchise tax expenses, partially offset by income on investments held in
trust account of approximately $7,000 and approximately $3,000 in income tax
benefit.
For the six months ended June 30, 2022, we had a net income of approximately
$10.6 million, which consisted of approximately $5.9 million in non-operating
gain from the change in fair value of derivative warrant liabilities,
approximately $6.0 million in non-operating gain from the forgiveness of
deferred underwriting commissions and income on investments held in trust
account of approximately $224,000, partially offset by approximately $1.4
million in general and administrative expenses, $60,000 in general and
administrative expenses - related party, approximately $100,000 in franchise tax
expenses and approximately $7,000 in income tax expenses.
For the six months ended June 30, 2021, we had a net income of approximately
$3.3 million, which consisted of approximately $3.8 million in non-operating
gain from the change in fair value of derivative warrant liabilities and income
on investments held in trust account of approximately $69,000, offset by
approximately $365,000 in general and administrative expenses, $60,000 in
general and administrative expenses - related party, and approximately $100,000
in franchise tax expenses.
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Related Party Transactions
Founder Shares
On July 10, 2020, the Sponsor purchased 3,737,500 Founder Shares for an
aggregate price of $25,000. On December 17, 2020, pursuant to the amended and
restated certificate of incorporation, each Founder Shares outstanding
immediately prior to December 17, 2020 was converted into one and
two-thirteenths (12/13) Founder Shares, resulting in an aggregate of 4,312,500
Founder Shares outstanding. Our initial stockholders agreed to forfeit up to
562,500 Founder Shares to the extent that the over-allotment option was not
exercised in full by the underwriters, so that the Founder Shares would
represent 20% of our issued and outstanding shares after the initial public
offering. The underwriter exercised its over-allotment option in full on
December 22, 2020; thus, these 562,500 Founder Shares were no longer subject to
forfeiture.
Our initial stockholders 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 or earlier if,
subsequent to the initial business combination, the closing price of the 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 initial business combination, and (B) the date following the
completion of the initial business combination on which we complete a
liquidation, merger, capital stock exchange or other similar transaction that
results in all of our stockholders having the right to exchange their Class A
common stock for cash, securities or other property. Any permitted transferees
will be subject to the same restrictions and other agreements of the initial
stockholders with respect to any Founder Shares.
Private Placement Warrants
Simultaneously with the closing of the initial public offering, we consummated
the private placement of 4,850,000 private placement warrants at a price of
$1.00 per private placement warrant to the Sponsor, generating proceeds of
$4,850,000. 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 to the Sponsor was added to the
proceeds from the initial public offering to be held in the trust account such
that at closing of the initial public offering, $172,500,000 was placed in the
trust account.
The private placement warrants (including the shares of common stock issuable
upon exercise of the private placement warrants) are not transferable,
assignable or salable until 30 days after the completion of the initial business
combination and they are non-redeemable and exercisable on a cashless basis so
long as they are held by the initial purchasers of the private placement
warrants or their permitted transferees. If the private placement warrants are
held by someone other than the initial purchasers of the private placement
warrants or their permitted transferees, the private placement warrants will be
redeemable by us and exercisable by such 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 sold as part of the Units in the initial public offering
and have no net cash settlement provisions.
If we do not complete a business combination by December 22, 2023, then the
proceeds will be part of the liquidating distribution to the public stockholders
and the warrants issued to the Sponsor will expire worthless.
Related Party Loans
On June 18, 2020, the Sponsor agreed to loan us an aggregate of up to $200,000
to cover expenses related to the initial public offering pursuant to a
promissory note (the "Note"). This loan was non-interest bearing and payable
upon the completion of the initial public offering. We borrowed approximately
$31,000 under the Note and fully repaid the Note in full on December 22, 2020.
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 our
officers and directors may, but are not obligated to, loan us working capital
loans. If we complete a business combination, we will repay the working capital
loans out of the proceeds of the trust account released to us. 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, we may use a
portion of proceeds held outside the trust account to repay the working capital
loans, but no proceeds held in the trust account would be used to repay the
working capital loans. The working capital loans would either be repaid upon
consummation of a business combination 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 $1.00 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 June 30, 2022 and
December 31, 2021, we had no borrowings under working capital loans.
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Administrative Services Agreement
Commencing on the date that our securities were first listed on Nasdaq until the
earlier of our consummation of a Business Combination or our liquidation, we
agreed to pay the Sponsor a total of $10,000 per month for office space,
secretarial and administrative services provided to members of our management
team. For the three months ended June 30, 2022 and 2021, we had incurred $30,000
and $30,000 in administrative services expenses under this agreement,
respectively. For the six months ended June 30, 2022 and 2021, we had incurred
$60,000 and $60,000 in administrative services expenses under this agreement,
respectively. As of June 30, 2022 and December 31, 2021, we had $0 and $20,000
outstanding, respectively, for services in connection with such agreement in due
to related parties on the accompanying condensed consolidated balance sheets.
The Sponsor, officers and directors, or any of their respective affiliates will
be reimbursed for any out-of-pocket expenses incurred in connection with
activities on our behalf such as identifying potential target businesses and
performing due diligence on suitable business combinations. Our audit committee
will review on a quarterly basis all payments that were made by us to the
Sponsor, directors, officers or directors, or any of their affiliates. As of
June 30, 2022 and December 31, 2021, there were $1,500 and $30,811 due to
related party, respectively.
Contractual Obligations
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 underlying
securities), are entitled to registration rights pursuant to a registration
rights agreement. These holders are entitled to make up to three demands,
excluding short form demands, that the Company registers such securities for
sale under the Securities Act. In addition, these holders will have "piggyback"
registration rights to include their securities in other registration statements
filed by us. We will bear the expenses incurred in connection with the filing of
any such registration statements.
Underwriting Agreement
We granted the underwriters a 45-day option to purchase up to 2,250,000
additional units to cover any over-allotments, at the initial public offering
price less the underwriting discounts and commissions. On December 22, 2020 we
issued 2,250,000 units in connection with the underwriters' exercise of the
over-allotment option in full. We paid an underwriting discount of $3,450,000
($0.20 per unit sold) to the underwriters at the closing of the initial public
offering on December 22, 2020, with an additional fee (the "Deferred Discount")
of $6,037,500 ($0.35 per unit sold) payable upon our completion of an initial
business combination.
On June 14, 2022, Dune entered into the Amendment Letter with Cantor to amend
the Underwriting Agreement, dated December 17, 2020, by and between Dune and
Cantor, as representative of the Underwriters, pursuant to which Cantor agreed
to waive in full the Deferred Discount. Pursuant to the Amendment Letter, Dune
agreed to grant Cantor with a right of first refusal to act as Dune's capital
markets advisor with an advisory fee of $3,800,000, subject to the conditions
described therein.
Critical Accounting Policies and Estimates
This management's discussion and analysis of our financial condition and results
of operations is based on our unaudited condensed consolidated financial
statements, which have been prepared in accordance with GAAP. The preparation of
these unaudited condensed consolidated financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses and the disclosure of contingent assets and liabilities in
our unaudited condensed consolidated financial statements. On an ongoing basis,
we evaluate our estimates and judgments, including those related to fair value
of financial instruments and accrued expenses. We base our estimates on
historical experience, known trends and events and various other factors that we
believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions. We have identified
the following as our critical accounting policies:
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Investments Held in the Trust Account
Our 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 our investments held in the trust account
are comprised of U.S. government securities, the investments are classified as
trading securities. When our 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
consolidated 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 on investments held in the trust account in the accompanying
condensed consolidated statements of operations. The estimated fair values of
investments held in the trust account are determined using available market
information.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Shares of Class A common stock subject to mandatory redemption (if any)
are classified as liability instruments and are measured at fair value. Shares
of conditionally redeemable Class A common stock (including Class A common stock
that features redemption rights that are either within the control of the holder
or subject to redemption upon the occurrence of uncertain events not solely
within our control) are classified as temporary equity. At all other times,
shares of Class A common stock are classified as stockholders' equity. Our Class
A common stock features certain redemption rights that are considered to be
outside of our control and subject to the occurrence of uncertain future events.
Accordingly, as of June 30, 2022 and December 31, 2021, a total of 1,182,054 and
17,250,000 shares, respectively, of Class A common stock subject to possible
redemption are presented at redemption value as temporary equity, outside of the
stockholders' deficit section of our condensed consolidated balance sheets.
Under ASC 480-10-S99, we have 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, we
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.
Net Income (Loss) Per Share of Common Stock
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." We have 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. This presentation assumes a business
combination as the most likely outcome. Net income (loss) per share of common
stock is calculated by dividing the net income (loss) by the weighted average
number of shares of common stock outstanding for the respective period.
The calculation of diluted net income per common stock does not consider the
effect of the warrants issued in connection with the Initial Public Offering and
the private placement to purchase an aggregate of 13,475,000 shares of common
stock in the calculation of diluted income per share, because their exercise is
contingent upon future events. As a result, diluted net income per share is the
same as basic net income per share for the three and six months ended June 30,
2022 and 2021. Accretion associated with the redeemable Class A common stock is
excluded from earnings per share as the redemption value approximates fair
value.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our 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 815-15. 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.
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The public warrants and the private placement warrants are recognized as
derivative liabilities in accordance with ASC 815. Accordingly, we recognize the
warrant instruments as liabilities at fair value and adjust 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 our condensed consolidated statements of operations.
The initial fair value of the public warrants has been measured at fair value
using a Monte Carlo simulation model. Subsequent to the public warrants being
traded on an active market, the fair value of the public warrants has been based
on the observable listed prices for such warrants. The fair value of the private
placement warrants was estimated using Black-Scholes. The determination of the
fair value of the warrant liability may be subject to change as more current
information becomes available and accordingly the actual results could differ
significantly. Derivative warrant liabilities are classified as non-current
liabilities as their liquidation is not reasonably expected to require the use
of current assets or require the creation of current liabilities.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, the unaudited condensed
consolidated financial statements may not be comparable to companies that comply
with new or revised accounting pronouncements as of public company effective
dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (ii) provide
all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection
Act, (iii) comply with any requirement that may be adopted by the PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the unaudited condensed
consolidated financial statements (auditor discussion and analysis) and (iv)
disclose certain executive compensation related items such as the correlation
between executive compensation and performance and comparisons of the CEO's
compensation to median employee compensation. These exemptions will apply for a
period of five years following the completion of our initial public offering or
until we are no longer an "emerging growth company," whichever is earlier.
Recent Accounting Pronouncements
In June 2022, the FASB issued ASU 2022-03, ASC Subtopic 820 "Fair Value
Measurement of Equity Securities Subject to Contractual Sale Restrictions." The
ASU amends ASC 820 to clarify that a contractual sales restriction is not
considered in measuring an equity security at fair value and to introduce new
disclosure requirements for equity securities subject to contractual sale
restrictions that are measured at fair value. The ASU applies to both holders
and issuers of equity and equity-linked securities measured at fair value. The
amendments in this ASU are effective for the Company in fiscal years beginning
after December 15, 2023, and interim periods within those fiscal years. Early
adoption is permitted for both interim and annual financial statements that have
not yet been issued or made available for issuance. The Company is still
evaluating the impact of this pronouncement on the condensed financial
statements.
Our management does not believe there are any other recently issued, but not yet
effective, accounting pronouncements, if currently adopted, that would have a
material effect on our unaudited condensed consolidated financial statements.
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Off-Balance Sheet Arrangement
As of June 30, 2022 and December 31, 2021, we did not have any off-balance sheet
arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have
any commitments or contractual obligations.
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