References in this report (the "Quarterly Report") to "we", "us", "our" or the
"Company" refer to Pershing Square Tontine Holdings, Ltd., and references to our
"management" or our "management team" refer to our officers and directors. The
following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the unaudited condensed
financial statements and the notes thereto contained elsewhere in this Quarterly
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 includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements, other than statements of historical facts, and including but not
limited to statements regarding the Company or the Company's management team's
expectations, hopes, beliefs, intentions or strategies regarding the future,
included in this Quarterly Report that address activities, events or
developments that the Company expects or anticipates will or may occur in the
future are forward-looking statements. These forward-looking statements involve
a number of risks, uncertainties (some of which are beyond the Company's
control) or other assumptions that may cause actual results or performance to be
materially different from those expressed or implied by these forward-looking
statements. Information concerning these and other factors can be found in the
Company's filings with the SEC, including those set forth in the Risk Factors
section of the Company's final prospectus for its initial public offering.
Copies are available on the SEC's website, www.sec.gov. In light of the
significant uncertainties in forward-looking statements, you should not regard
such statements as a representation or warranty that the Company will achieve
its objectives and plans in any specified timeframe, or at all, and you should
not place undue reliance on any forward-looking statements. The Company
disclaims any intention or obligation to update or revise any forward-looking
statements, except as may be required by law.
Overview
We are a blank check company incorporated as a Delaware corporation and formed
for the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination with
one or more businesses. We intend to effectuate our Initial Business Combination
using cash from the proceeds of the initial public offering and the private
placements of the Sponsor Warrants, Director Warrants and Forward Purchase
Units, our capital stock, debt or a combination of cash, stock and debt. Our
Initial Business Combination will be a negotiated transaction, not a hostile
takeover.
The issuance of additional shares of our stock in a business combination,
including the Forward Purchase Securities:

  •   may significantly dilute the equity interest of investors;



      •   may subordinate the rights of holders of our common stock if preferred
          stock is issued with rights senior to those afforded our common stock;



      •   could cause a change in control if a substantial number of shares of our
          common stock is issued, which may affect, among other things, our ability
          to use net operating loss carry forwards, if any, and could result in the
          resignation or removal of our present directors and officers;



      •   may have the effect of delaying or preventing a change of control of us
          by diluting the stock ownership or voting rights of a person seeking to
          obtain control of us; and



      •   may adversely affect prevailing market prices for our Class A Common
          Stock and/or Redeemable Warrants.

Similarly, if we issue debt instruments or otherwise incur significant indebtedness, it could result in:



      •   default and foreclosure on our assets if our operating revenues after our
          Initial Business Combination are insufficient to repay our debt
          obligations;



      •   acceleration of our obligations to repay the indebtedness even if we make
          all principal and interest payments when due if we breach certain
          covenants that require the maintenance of certain financial ratios or
          reserves without a waiver or renegotiation of that covenant;



      •   our immediate payment of all principal and accrued interest, if any, if
          the debt security is payable on demand;



      •   our inability to obtain necessary additional financing if the debt
          security contains covenants restricting our ability to obtain such
          financing while the debt security is outstanding;



  •   our inability to pay dividends on our common stock;



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      •   using a substantial portion of our cash flow to pay principal and
          interest on our debt, which will reduce the funds available for dividends
          on our common stock if declared, our ability to pay expenses, make
          capital expenditures and acquisitions, and fund other general corporate
          purposes;



      •   limitations on our flexibility in planning for and reacting to changes in
          our business and in the industry in which we operate;



      •   increased vulnerability to adverse changes in general economic, industry
          and competitive conditions and adverse changes in government regulation;
          limitations on our ability to borrow additional amounts for expenses,
          capital expenditures, acquisitions, debt service requirements, and
          execution of our strategy; and



      •   other purposes and other disadvantages compared to our competitors who
          have less debt.


We expect to continue to incur costs in the pursuit of our acquisition plans. We
cannot assure you that our plans to complete our Initial Business Combination
will be successful.
Recent Developments
Below is a description of the proposed Initial Business Combination, which was
ultimately not consummated.
On June 20, 2021, the Company entered into a Share Purchase Agreement (the
"Share Purchase Agreement") with Vivendi to purchase a number of ordinary
shares, par value €10 per share, representing approximately 10% of the share
capital and voting rights, on a fully diluted basis, of UMG (the "UMG Shares")
for approximately $4 billion (the "Share Purchase"), with the expectation that
the Company would distribute the UMG Shares to its Public Stockholders (the
"Distribution" and together with the Share Purchase, the "Proposed IBC"). The
Company expected that the Share Purchase would be consummated in the third
quarter of 2021 and the Distribution would occur in November or December 2021.
In connection with the Proposed IBC, the Company and Vivendi also entered into
an indemnification agreement pursuant to which the Company agreed to indemnify
Vivendi and certain of its related parties for certain potential liabilities in
connection with the Company's redemption tender offer, the warrant exchange
offer and the Distribution (each as further described below).
Also on June 20, 2021, the Company, the Sponsor, the Pershing Square Funds and
the Company's independent directors entered into the Pershing Entities Letter
Agreement, pursuant to which:

        ?    The Company and the Pershing Square Funds agreed to amend and restate
             the Forward Purchase Agreement concurrently with the closing of the
             Proposed IBC, pursuant to which the Forward Purchasers would exercise
             their right to purchase an aggregate amount of $1.6 billion of Forward
             Purchase Units ($1.0 billion of Committed Forward Purchase Units and
             $600 million of Additional Forward Purchase Units). The price per
             share at which the Pershing Square Funds would have exercised such
             amended Forward Purchase Agreement would be equal to RemainCo's net
             asset value at the time of such purchase;



        ?    The Company and the Sponsor agreed to amend the Sponsor Warrants
             concurrently with the closing of the Proposed IBC, such that the
             Sponsor Warrants would not be exercised or otherwise participate in
             the Proposed IBC. Instead, they would remain in place, but the
             exercise price would be adjusted to equal 120% of RemainCo's net asset
             value immediately prior to the time it completed its anticipated
             future business combination with an operating business; and



        ?    The Company and its independent directors agreed that the Director
             Warrants would not be exercised in connection with the Proposed IBC,
             and would be amended concurrently with the closing of the Proposed
             IBC. The result of such amendment would have been that, (i) the
             holders of the Director Warrants would receive shares in the Company
             in exchange for approximately 72% of the fair market value of the
             Director Warrants (as determined by a third-party valuation firm), to
             compensate for the fact that they would not participate in the
             Proposed IBC as originally envisioned, (ii) such shares would
             participate in the Distribution and (iii) the roughly 28% of the value
             of the Director Warrants would remain in place with their exercise
             price adjusted in the same manner as the exercise price of the Sponsor
             Warrants as explained above.

The Company further announced that it expected to undertake a 1:4 reverse stock split following the issuance of the Distributable Tontine Redeemable Warrants, all warrants in respect of the Forward Purchase Agreement and Director Forward Purchase Agreements and the Distribution so that its net asset value ("NAV") would be approximately $22 per share. Pursuant to the Proposed IBC, following the Distribution, the Company would have continued to exist and it would not have disappeared into UMG nor would it have been liquidated. The Company continuing to exist is referred to herein as "RemainCo". RemainCo would have been the same corporate entity and it would have continued to be named Pershing Square Tontine Holdings, Ltd. The Public Stockholders would have continued to own shares in RemainCo, and it was intended that RemainCo would pursue a



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traditional business combination with an operating business (RemainCo's "Future
Business Combination").
On July 8, 2021, the Company launched (i) a redemption tender offer which was
intended to provide Public Stockholders with the opportunity to exercise their
right to redeem their shares of Class A Common Stock in connection with the
Proposed IBC and (ii) a warrant exchange offer which provided holders of the
Company's currently outstanding Distributable Redeemable Warrants the
opportunity to exchange those warrants for shares of Class A Common Stock at a
ratio of 0.2650 shares per warrant.
On July 19, 2021, the Company announced that its board of directors unanimously
determined not to proceed with the Proposed IBC and the Company had agreed to
assign its rights and obligations under the Share Purchase Agreement with
Vivendi to Pershing Square Holdings, Ltd. and certain of its affiliates (the
"Assignees"). The Assignees agreed to purchase or cause to be purchased at least
5% of the share capital of UMG on the terms and subject to the conditions of the
Share Purchase Agreement and Vivendi acknowledged that if the Assignees
purchased at least 5% of the share capital of UMG, the Share Purchase Agreement
would be of no further force with respect to remaining UMG shares to be
purchased under the Share Purchase Agreement. In addition, the Assignees,
severally in accordance with their obligations to purchase UMG shares, agreed to
assume and reimburse the Company for
out-of-pocket
expenses incurred to date by the Company in connection with transactions related
to the Proposed IBC, which totaled $25,065,931. The Assignees also assumed,
severally in accordance with their obligations to purchase UMG shares, the
Company's obligations under the indemnification agreement, between the Company
and Vivendi.
On July 21, 2021, the Company terminated its redemption tender offer and warrant
exchange offer, and no shares were redeemed from the Company. As a result of the
termination of these offers and the cancellation of the Proposed IBC, the
Pershing Entities Letter Agreement did not come into effect and there have been
no changes to the instruments discussed as exhibits to such letter agreement.
The FPA, Sponsor Warrants and Director Warrants remain as initially issued as of
June 21, 2020 and July 21, 2020, respectively.
Given the events of July 19 and July 21, the Company is seeking an alternative
initial business combination.
On August 10, 2021, the Assignees completed an initial closing under the Share
Purchase Agreement acquiring 128,555,017 UMG shares, or approximately 7.1% of
the share capital of UMG, for an aggregate purchase price of $2.8 billion, as a
result of which the Company was released from its obligations under the Share
Purchase Agreement and the indemnification agreement described above (which
indemnity was allocated without the participation of the Company, among the
Pershing Square Funds). Also on August 10, 2021, the Company acknowledged and
stepped out of the registration rights agreement, transferring it to the
Assignees, which now provides, among other things, the Assignees the ability to
register UMG in a U.S. initial public offering no earlier than 2023 rather than
providing for the Distribution that the Company envisioned in the Proposed IBC
at the end of this calendar year.
This Quarterly Report on the
10-Q
reflects the position of the Company as of September 30, 2021.
Certain Observations
During the third quarter of 2021, the Proposed IBC with Vivendi was cancelled
and assigned to Pershing Square Holdings, Ltd. and certain of its affiliates, as
discussed in detail in the preceding section. Subsequent to the cancellation, we
continued to work on identifying a target for an Initial Business Combination.
For the three months ended September 30, 2021, we recorded net income of
$344,375,472, which was primarily due to a
non-cash
GAAP gain of $327,155,205 related to the change in valuations of our Outstanding
Warrants and FPA, each of which was previously accounted for as equity on our
financial statements through December 31, 2020. The change in accounting was
initiated following publication of a statement by the Staff of the SEC on
accounting for SPAC warrants, which impacted nearly all SPACs. As a result of
the SEC's public statement, management along with the audit committee
reconsidered accounting issues related to these instruments and restated our
financial statements at December 31, 2020 to account for our Outstanding
Warrants and FPA as derivative liabilities. For the three months ended
September 30, 2021, this accounting treatment has required us to record a large
non-cash
GAAP gain that does not represent an actual cash gain by the Company, nor do we
believe it will have any effect on our ability to consummate an initial business
combination on attractive terms.
The revised accounting methodology relates to certain features of the
Outstanding Warrants and our FPA (the terms of which entitle the Sponsor and
directors to receive warrants in addition to common stock) that are designed to
protect the holders of warrants by entitling them to be exchanged for cash in
certain events. The revised accounting requires that we account for the
Outstanding Warrants and FPA as liabilities or assets equal to their fair value
at the end of each reporting period.
The impact of this accounting treatment is highly volatile as it is driven by
changes in our stock price. If our stock price increases over a given
measurement period, the fair values of our warrants and FPA will also increase
in value and result in a liability being recorded on our balance sheet and a
non-cash
GAAP loss recorded in our earnings statement for the period, all other things
being equal. Conversely, if our stock price declines over a measurement period,
we will record a smaller liability or an asset

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on our balance sheet and report a
non-cash
GAAP gain in our earnings statement, notwithstanding that our stockholders will
be holding shares that have declined in value over the measurement period.
Non-cash
GAAP gains or losses due to changes in the fair value of such instruments have
no impact on our business or our cash balances - including the more than
$4 billion we hold in a trust account at J.P. Morgan - and the minimum Committed
FPA of $1 billion, nor do we expect the change in accounting to have any impact
on our ability to consummate a potential initial business combination.
Results of Operations
All activities through September 30, 2021 were related to the Company's
organizational activities, preparation for the Company's initial public
offering, identifying a target company for a business combination, and
activities in connection with the Proposed IBC and its subsequent cancellation.
We will not generate any operating revenues until after completion of our
Initial Business Combination. We generate
non-operating
income in the form of interest and dividends on cash and cash equivalents, and
marketable securities held in the trust account. We incur ongoing expenses as a
result of being a public company for legal, financial reporting, accounting and
auditing compliance, as well as for due diligence and Initial Business
Combination related transaction expenses.
For the three months ended September 30, 2021, we had net income of
$344,375,472, which consisted of
(i) non-cash
gain related to change in the fair value of Forward Purchase Agreement
liabilities/assets of $313,523,920, (ii)
non-cash
gain related to change in the fair value of Outstanding Warrant liabilities of
$13,631,285, (iii) income earned on marketable securities held in the trust
account of $259,802, (iv) interest and dividends earned on marketable securities
held in the operating account of $458, (v) income tax benefit of $6,211, (vi)
expense reimbursement of $25,065,931, offset by legal, insurance, research,
franchise tax and other expenses totaling $8,112,135.
For the three months ended September 30, 2020, we had net loss of $447,053,879,
which consisted of
(i) non-cash
loss related to change in the fair value of Forward Purchase Agreement
liabilities of $231,470,840, (ii)
non-cash
loss related to change in the fair value of Outstanding Warrant liabilities of
$214,771,598, (iii) transaction costs allocable to Outstanding Warrant
liabilities of $912,625, (iv) legal, insurance, research, franchise tax and
other expenses totaling $668,764, (v) provision for income taxes of $23,473,
offset by (a) income earned on marketable securities held in the trust account
of $792,654, and (b) interest and dividends earned on marketable securities held
in the operating account of $767.
For the nine months ended September 30, 2021, we had net income of $848,279,189,
which consisted of
(i) non-cash
gain related to change in the fair value of Forward Purchase Agreement
liabilities/assets of $599,509,640, (ii)
non-cash
gain related to change in the fair value of Outstanding Warrant liabilities of
$249,663,472, (iii) income earned on marketable securities held in the trust
account of $1,250,118, (iv) interest and dividends earned on marketable
securities held in the operating account of $1,529, (v) expense reimbursement of
$25,065,931, offset by (a) legal, insurance, research, franchise tax and other
expenses totaling $26,992,169 and (b) provision for income taxes of $219,332.
For the period from May 4, 2020 (inception) through September 30, 2020, we had
net loss of $447,066,761, which consisted of
(i) non-cash
loss related to change in the fair value of Forward Purchase Agreement
liabilities of $231,470,840, (ii)
non-cash
loss related to change in the fair value of Outstanding Warrant liabilities of
$214,771,598, (iii) transaction costs allocable to Outstanding Warrant
liabilities of $912,625, (iv) provision for income taxes of $23,473, offset by
(a) income earned on marketable securities held in the trust account of
$792,654, (b) interest and dividends earned on marketable securities held in the
operating account of $767, and (c) legal, insurance, research, franchise tax and
other expenses totaling $681,646.
Non-GAAP
Financial Measures
As noted above, the Company was formed for the purpose of effecting a merger,
capital stock exchange, asset acquisition, stock purchase, reorganization or
similar business combination with one or more businesses. As such, we believe
the amount of committed capital available for an Initial Business Combination is
critical to our success as a blank check company. See Liquidity and Capital
Resources below for further information on our unrestricted cash balances and
funds held in the trust account as of September 30, 2021. In addition, we report
adjusted net income for the three months ended September 30, 2021 and adjusted
net loss for the nine months ended September 30, 2021, which is a
non-GAAP
financial measure that is not required by, or presented in accordance with,
GAAP. Management uses this
non-GAAP
measure to evaluate results as it reduces the volatility of operations due to
the accounting for our warrants and forward purchase agreements, which are more
fully described in Note 2 of the Notes to Unaudited Condensed Financial
Statements included herein, and which do not have an impact on the funds held in
the trust account or committed capital available for an Initial Business
Combination. We believe this information is useful to investors for these
reasons. This
non-GAAP
measure should not be considered a substitute for the most directly comparable
GAAP measures, which are reconciled below. Further, this measure has limitations
as an analytical tool, and when assessing our operating performance, you should
not consider this measure in isolation or as a substitute for GAAP measures. We
may calculate or present this
non-GAAP
financial measure differently than other companies who report measures with the
same or similar names, and as a result, the
non-GAAP
measure we report may not be comparable.

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Adjusted net income/(loss), represents our net income/(loss) excluding the
change in fair value of forward purchase agreement liabilities/assets and the
change in fair value of Outstanding Warrant liabilities, which are
non-cash
items. As of September 30, 2021, our unaudited condensed balance sheets reflect
a net liability of $207,424,892 (net of Forward Purchase Agreement assets)
(December 31, 2020: $1,056,598,004) related to derivative liabilities/assets
which do not impact the funding available for an Initial Business Combination.
As can be observed, the value of the liabilities/assets relating to these
instruments under GAAP (and the related income/(loss) that flows through the
statements of operations) can swing significantly when in fact no economic
changes have occurred.

                                                 For the Three                For the Nine
                                                  Months Ended                Months Ended
                                               September 30, 2021          September 30, 2021

Net income                                    $        344,375,472        $        848,279,189
Less:
Change in fair value of Forward Purchase
Agreement liabilities/assets                           313,523,920                 599,509,640
Change in fair value of Outstanding
Warrant liabilities                                     13,631,285                 249,663,472

Adjusted net income/(loss
)                                             $         17,220,267        $           (893,923 )


Liquidity and Capital Resources
Our liquidity needs had been satisfied prior to the consummation of the initial
public offering through a capital contribution of $25,000 by our Sponsor in
exchange for 100 shares of Class B Common Stock, and interest-bearing loans of
$1,121,120 from our Sponsor under an unsecured promissory note covering expenses
related to the initial public offering. The loan was repaid in full on July 24,
2020, inclusive of interest. As of September 30, 2021 and December 31, 2020,
$378,880 was left under the promissory note to be drawn down, and there were no
borrowings outstanding, respectively.
On July 24, 2020, we consummated the initial public offering of 200,000,000
Units, at $20.00 per unit, generating gross proceeds of $4,000,000,000.
Simultaneously with the closing of the initial public offering, we consummated a
$67,837,500 sale of Sponsor Warrants and Director Warrants in private
placements.
Following the initial public offering and the private placements of Sponsor
Warrants and Director Warrants, a total of $4,000,000,000 was placed into the
trust account. We incurred $94,623,187 in offering costs, including $35,000,000
of underwriting fees, $56,250,000 of deferred underwriting fees and $3,373,187
of other offering costs. The per share amount to be distributed to Public
Stockholders who properly redeem their Public Shares will not be reduced by the
deferred underwriting fees (further discussed below).
As of September 30, 2021, we had an unrestricted cash balance of $32,662,874 in
the operating account, held outside the trust account to fund our ongoing
expenses, as well as cash and marketable securities held in the trust account of
$4,002,434,511. Interest and dividend income earned on the balance in the trust
account will be used to pay taxes on such income. During the three months ended
September 30, 2021, we withdrew $72,290 of income earned on the trust account to
pay our income tax obligations.
We intend to use substantially all of the funds held in the trust account,
including any amounts representing interest and dividends earned on the trust
account (less taxes payable and deferred underwriting fees), and the proceeds
from the sale of the Forward Purchase Units to complete an Initial Business
Combination. To the extent that our capital stock or debt is used, in whole or
in part, as consideration to complete the Initial Business Combination, the
remaining proceeds held in the trust account will be used as working capital to
finance the operations of the target business or businesses, make other
acquisitions, and pursue our growth strategies.
In order to fund working capital deficiencies or finance transaction costs in
connection with an Initial Business Combination, our Sponsor or an affiliate of
our Sponsor or certain of our directors and officers may, but are not obligated
to, loan us funds as may be needed. If we complete the Initial Business
Combination, we would repay such loaned amounts. In the event that the Initial
Business Combination does not close, we may use a portion of the working capital
held outside the trust account to repay such loaned amounts, but no proceeds
from our trust account would be used for such repayment.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimates of
the costs of identifying a target business, undertaking
in-depth
due diligence and negotiating our Initial Business Combination are less than the
actual amount necessary to do so, we may have insufficient funds available to
operate our business prior to our business combination. Moreover, we may need to
obtain additional financing either to complete our Initial Business Combination
or because we become obligated to redeem a significant number of the shares of
our Public Shares upon completion of our Initial Business Combination, in which
case we may issue additional securities or incur debt in connection with such
business combination. Subject to compliance with applicable securities laws, we
would only complete such financing simultaneously with the completion of our
Initial Business Combination. If we are unable to complete our Initial Business
Combination because we do not have

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sufficient funds available to us, we will be forced to cease operations and
liquidate the trust account. In addition, following our Initial Business
Combination, if cash on hand is insufficient, we may need to obtain additional
financing in order to meet our obligations.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, and operating
lease obligations as of September 30, 2021.
The underwriters are entitled to a deferred fee of $0.28 per Unit, or
$56,250,000 in the aggregate. The aggregate deferred underwriting fees includes
(i) the deferral of any underwriting fees, other than the retail selling
concessions, in excess of $30,000,000 (a deferral of $12,500,000), plus (ii) a
2.0% rate applied to the gross offering proceeds, subject to a $56,250,000 cap
on the amount of such aggregate deferred underwriting fees. If the amount of
proceeds from the trust account paid in connection with the redemption rights of
Public Stockholders, together with the amount of any capital raised in private
placements in connection with the Initial Business Combination from investors
other than Sponsor or its affiliates (the "Net Redemptions"), results in us
having less than $2,000,000,000 of cash available upon consummation of the
Initial Business Combination, only 25% of the aggregate deferred underwriting
fees will be payable. If such amount of cash available is $2,000,000,000 or
greater, 50% of the aggregate deferred underwriting fees will be payable, and
the remaining 50% of the aggregate deferred underwriting fees will be subject to
a
pro-rata
reduction based on the amount of Net Redemptions as a percentage of the total
public proceeds of the initial public offering. The deferred underwriting fees
will be waived by the underwriters solely in the event that we do not complete a
business combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of the unaudited condensed financial statements and related
disclosures in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and income and expenses during the periods reported. Actual results
could materially differ from those estimates. We have identified the following
critical accounting policies:
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." The Company's conditionally redeemable Class A Common Stock features
certain redemption rights that are considered to be outside of its control and
subject to the occurrence of uncertain future events. Accordingly, at
September 30, 2021 and December 31, 2020, 200,000,000 shares of Class A Common
Stock subject to possible redemption were presented at redemption value as
temporary equity, respectively, outside of the stockholders' equity section of
the Company's condensed balance sheets. The Company adjusts the carrying value
of redeemable common stock to equal the redemption value of the cash held in the
Trust Account net of income taxes payable at the end of each reporting period.
Outstanding Warrants and FPA Liabilities / Assets
We account for our Outstanding Warrants and FPA in accordance with the guidance
contained in ASC
815-40,
under which the Outstanding Warrants and FPA do not meet the criteria for equity
treatment and must be recorded as derivative liabilities or derivatives assets.
Accordingly, we classify the Outstanding Warrants and FPA as liabilities or
assets with changes in fair value reflected on the Company's condensed statement
of operations at each reporting period. The fair value of the Public Warrants
was initially measured using a modified Black-Scholes pricing model and
subsequently measured at the closing quoted market price. The Private Placement
Warrants and FPA are valued using a modified Black-Scholes pricing model. See
Note 7 of the Notes to Unaudited Condensed Financial Statements included herein
for further information on the significant inputs to the models utilized to
determine the fair values of the Outstanding Warrants and FPA
liabilities/assets.
Net Income (Loss) per Common Share
We apply the
two-class
method of calculating earnings per share. Net income (loss) per common share,
basic and diluted, for Class A Common Stock subject to possible redemption is
calculated by dividing the allocable income earned on the Trust Account, net of
applicable income taxes, by the weighted-average number of Class A Common Stock
subject to possible redemption outstanding for the period. Net income (loss) per
share, basic and diluted, for Class B
non-redeemable
common stock is calculated by dividing the net income (loss), adjusted for
income (loss) attributable to Class A Common Stock subject to possible
redemption, by the weighted-average number of Class B
non-redeemable
common stock outstanding for the period.

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Off-Balance
Sheet Arrangements
As of September 30, 2021, we did not have any
off-balance
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation
S-K.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a material impact on
the Company's unaudited condensed financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of September 30, 2021, we were not subject to any material market or interest
rate risk. Following the consummation of our initial public offering, the net
proceeds of our initial public offering and the private placements of the
Sponsor Warrants and Director Warrants that are held in the trust account have
been invested in U.S. Treasury bills with a maturity of 180 days or less or in
money market funds meeting certain conditions under Rule
2a-7
under the Investment Company Act which invest only in direct U.S. Treasury
obligations. Due to the short-term nature of these investments, we believe there
will be no associated material exposure to interest rate risk. However, if the
interest rates of U.S. Treasury obligations become negative, we may have less
proceeds held in the trust account than initially deposited.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act is recorded, processed, summarized, and
reported within the time periods specified in the SEC's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in our
reports filed or submitted under the Exchange Act is accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, to allow timely decisions regarding required disclosure.
Our management evaluated, with the participation of our Chief Executive Officer
and Chief Financial Officer (our "Certifying Officers"), the effectiveness of
our disclosure controls and procedures as of September 30, 2021, pursuant to
Rule
13a-15(b)
under the Exchange Act. Based on their evaluation, our Certifying Officers have
concluded that, solely due to the circumstance that led to the restatement of
our financial statements from the initial public offering until December 31,
2020 to reclassify our Outstanding Warrants and FPA as described in the
Explanatory Note to our Form
10-K/A
filed with the SEC in May 2021, our disclosure controls and procedures were not
effective as of September 30, 2021.
We do not expect that our disclosure controls and procedures will prevent all
errors and all instances of fraud. Disclosure controls and procedures, no matter
how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the disclosure controls and procedures are met.
Further, the design of disclosure controls and procedures must reflect the fact
that there are resource constraints, and the benefits must be considered
relative to their costs. Because of the inherent limitations in all disclosure
controls and procedures, no evaluation of disclosure controls and procedures can
provide absolute assurance that we have detected all our control deficiencies
and instances of fraud, if any. The design of disclosure controls and procedures
also is based partly on certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions.
Management's Report on Internal Controls Over Financial Reporting
This Quarterly Report on
Form 10-Q does
not include a report of management's assessment regarding internal control over
financial reporting or an attestation report of our independent registered
public accounting firm due to a transition period established by rules of the
SEC for newly public companies.
Changes in Internal Control Over Financial Reporting
During the most recently completed fiscal quarter, there has been no change in
our internal control over financial reporting (as such term is defined in Rules
13a-15(f)
and
15d-15(f)
of the Exchange Act) that have materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting. In light of
the restatement of our December 31, 2020 financial statements in May 2021,
management has implemented remediation steps to address the material weakness
and to improve our internal control

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Table of Contents over financial reporting. Specifically, we expanded and improved our review process for complex securities and related accounting standards, including the identification of third-party professionals with whom to consult regarding the application of complex accounting matters, and engaged third-party valuation specialists to assist management in determining the fair values of the Sponsor Warrants, Director Warrants, and FPA. While we believe that these remediation actions will improve the effectiveness of our internal control over financial reporting, which began in the second quarter of 2021, the material weakness identified will not be considered remediated until the controls operate for a sufficient period of time, and we can offer no assurance that these initiatives will ultimately have the intended effects.



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