AEON Biopharma, Inc 10-Q for FY2021 Q3
AEON Biopharma, Inc. (AEON)
About this 10-Q
AEON Biopharma, Inc filed this 10-Q on November 15, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).
Headline figures
Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net income
- $5.66M
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from to.
(Exact name of registrant as specified in its charter) |
|
| |||
(State or other jurisdiction of incorporation) | | (Commission File Number) |
| (I.R.S. Employer Identification Number) |
(
Registrant’s Telephone Number, Including Area Code
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
|
| The | ||
|
| The | ||
|
| The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | |
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of November 15, 2021,
PRIVETERRA ACQUISITION CORP.
Form 10-Q
For the Quarter Ended September 30, 2021
Table of Contents
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PRIVETERRA ACQUISITION CORP.
CONDENSED BALANCE SHEETS
|
| September 30, 2021 |
| December 31, 2020 | ||
| | (Unaudited) | | | ||
Assets | | | | | | |
Current assets | | | | | | |
Cash | | $ | | | $ | — |
Deferred offering costs | | | — | | | |
Prepaid assets | |
| | |
| — |
Total Current Assets | | | | | | |
| | | | | | |
Prepaid assets – non-current | |
| | |
| — |
Investments held in Trust Account | | | | | | — |
Total Assets | | $ | | | $ | |
| | | | | | |
Liabilities and Stockholders’ Equity (Deficit) | |
| | |
| |
Current liabilities: | | | | | | |
Accounts payable and accrued expenses | | $ | | | $ | |
Franchise tax payable | | | | | | — |
Due to related party | | | | | | — |
Promissory note – related party | | | — | | | |
Total current liabilities | | | | | | |
| | | | | | |
Warrant liability | |
| | |
| — |
Deferred underwriters’ discount | |
| | |
| — |
Total liabilities | |
| | |
| |
| |
| | |
|
|
Commitments and Contingencies | |
| | |
|
|
| | | | | | |
Common stock subject to possible redemption, | | | | | | — |
| |
| | |
|
|
Stockholders’ Equity (Deficit): | |
| | |
|
|
Preferred stock, $ | |
| |
| ||
Class A common stock, $ | |
| — | |
| — |
Class B common stock, $ | |
| | |
| |
Additional paid-in capital | |
| | |
| |
Retained earnings (accumulated deficit) | | | ( | | | ( |
Total stockholders’ equity (deficit) | |
| ( | |
| |
Total Liabilities and Stockholders’ Equity (Deficit) | | $ | | | $ | |
The accompanying notes are an integral part of the unaudited condensed financial statements.
3
PRIVETERRA ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
| | For the | | For the | ||
| | three months ended | | nine months ended | ||
|
| September 30, 2021 |
| September 30, 2021 | ||
| | | | | | |
Formation and operating costs | | $ | | | $ | |
Loss from operations | | | ( | | | ( |
| | | | | | |
Other income/(expense) | | | | | | |
Unrealized gain on change in fair value of warrants | | | | | | |
Offering costs | | | — | | | ( |
Interest income | | | | | | |
Total other income/(expense) | | | | | | |
| | | | | | |
Net Income | | $ | | | $ | |
| |
| | |
| |
Basic weighted average shares outstanding, Class A common stock subject to possible redemption | |
| | |
| |
Basic net income per share, Class A common stock subject to possible redemption | | $ | | | $ | |
Diluted weighted average shares outstanding, Class A common stock | | | — | | | |
Diluted net income per share, Class A common stock | | | — | | $ | |
Basic weighted average shares outstanding, Class B common stock | |
| | |
| |
Basic net income per share, Class B common stock | | $ | | | $ | |
Diluted weighted average shares outstanding, Class B common stock | | | — | | | |
Diluted net income per share, Class B common stock | | $ | — | | $ | |
The accompanying notes are an integral part of the unaudited condensed financial statements.
4
PRIVETERRA ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
(Unaudited)
| | Common Stock | | Additional | | | | Total | ||||||
| | Class B | | Paid-In | | | | Stockholders’ | ||||||
|
| Shares |
| Amount |
| Capital |
| Accumulated Deficit |
| Equity (Deficit) | ||||
Balance—December 31, 2020 | | | | $ | | | $ | | | $ | ( | | $ | |
Excess cash over fair value for Private Placement Warrants | | — | | | — | | | | | | | | | |
Accretion of Class A common stock to redemption value | | — | | | — | | | ( | | | ( | | | ( |
Net income |
| — | | | — | |
| | |
| | |
| |
Balance as of March 31, 2021 |
| | | $ | | | $ | | | $ | ( | | $ | ( |
| | | | | | | | | | | | | | |
Net loss | | — | | | — | | | | | | ( | | | ( |
Excess cash received over the fair value of the converted working capital loan | | — | | | — | | | | | | | | | |
Balance as of June 30, 2021 | | | | | | | | | | | ( | | | ( |
| | | | | | | | | | | | | | |
Net income |
| — | | | — | |
| | |
| | |
| |
Balance as of September 30, 2021 |
| | | | | | | | | | ( | | | ( |
The accompanying notes are an integral part of the unaudited condensed financial statements.
5
PRIVETERRA ACQUISITION CORP.
CONDENSED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Unaudited)
Cash Flows from Operating Activities: |
|
| |
Net income | | $ | |
Adjustments to reconcile net income to net cash used in operating activities: | |
| |
Interest earned on investments held in Trust Account | | | ( |
Unrealized gain on change in fair value of warrants | | | ( |
Offering costs | | | |
Changes in operating assets and liabilities | |
|
|
Prepaid assets | | | ( |
Franchise tax payable | | | |
Accounts payable and accrued expenses | | | |
Net cash used in operating activities | |
| ( |
Cash flows from investing activities: | | | |
Principal invested into Trust account | | | ( |
Net cash used in investing activities | | | ( |
Cash flows from financing activities: | |
|
|
Due to related party | | | |
Proceeds from sale of Units, net of underwriter fee | |
| |
Offering costs | | | ( |
Proceeds from issuance of Private Placement Warrants | | | |
Borrowing from promissory note | |
| |
Repayment of promissory note | |
| ( |
Net cash provided by financing activities | |
| |
Net Change in Cash | |
| |
Cash, beginning of the period | |
| — |
Cash, end of period | | $ | |
Supplemental Disclosure of Non-cash Financing Activities: | |
| |
Deferred underwriters’ discount payable charged to additional paid in capital | | $ | |
Conversion of Working Capital Loans to Private Placement Warrants | | $ | |
The accompanying notes are an integral part of the unaudited condensed financial statements.
6
PRIVETERRA ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
Note 1 — Organization and Business Operation
Organization and General
Priveterra Acquisition Corp. (the “Company”) is a blank check company incorporated in Delaware on November 17, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with
The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of September 30, 2021, the Company had not commenced any operations. All activity for the period from November 17, 2020, the Company’s inception, through September 30, 2021, relates to the Company’s formation and the initial public offering (“IPO”) described below. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the IPO and unrealized gains and losses on the change in fair value of it warrants. The Company has selected December 31 as its fiscal year end.
The Company’s sponsor is Priveterra Sponsor, LLC, a Delaware limited liability company (the “Sponsor”).
Financing
The registration statement for the Company’s IPO was declared effective on February 8, 2021 (the “Effective Date”). On February 11, 2021, the Company consummated an IPO of
Simultaneously with the closing of the IPO, the Company consummated the sale of
Transaction costs of the IPO amounted to $
7
Trust Account
Following the closing of the IPO on February 11, 2021, $
Initial 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 approximately $
The shares of common stock subject to redemption are recorded at a redemption value and classified as temporary equity upon the IPO, in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $
The Sponsor, officers and directors have agreed to (i) waive their redemption rights with respect to their founder shares and 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 if the Company fails to complete the initial Business Combination within the Combination Period.
Liquidation
The Company will have 24 months from the closing of the IPO to complete the initial Business Combination (the “Combination Period”). However, if the Company is unable to complete the initial Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes (less up to $
8
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) $
Liquidity and Capital Resources
The Company’s liquidity needs up to February 11, 2021, the date of the IPO, had been satisfied through a capital contribution from the Sponsor of $
The Company’s IPO was on February 11, 2021. As of September 30, 2021, the Company had $
Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will be using the working capital for identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Note 2 — Revision of Previously Issued Financial Statements
In the Company’s previously issued financial statements, a portion of the public shares were classified as permanent equity to maintain stockholders’ equity greater than $
Management re-evaluated the Company’s application of ASC 480-10-99 to its accounting classification of public shares. Upon re-evaluation, management determined that the public shares include certain provisions that require classification of the public shares as temporary equity regardless of the minimum net tangible asset required by the Company to complete its initial business combination.
In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements;” the Company evaluated the changes and has determined that the related impacts were not material to any previously presented financial statements. Therefore, the Company, in consultation with its Audit Committee, concluded that its previously issued financial statements impacted should be revised to report all public shares as temporary equity. As such the Company is revising those periods in this Quarterly Report.
In connection with the change in presentation for the Class A common stock subject to possible redemption, the Company also revised its earnings per share calculation to allocate income and losses shared pro rata between the two classes of shares. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of shares share pro rata in the income and losses of the Company.
9
Impact of the Revision
The impact to the financial statements as of June 30, 2021, March 31, 2021 and February 11, 2021 is presented below:
|
| As |
| | |
| | | |
| | Previously | | Revision | | As | |||
| | Reported | | Adjustment | | Revised | |||
| | | | | | | | | |
Condensed Balance Sheet as of June 30, 2021 | | | | | | | | | |
Class A common stock, $ | | $ | | | $ | | | $ | |
Stockholders’ equity | |
|
| |
|
| |
|
|
Class A common stock - $ | |
| | |
| ( | |
| — |
Class B common stock - $ | |
| | |
| — | |
| |
Additional paid-in capital | |
| | |
| ( | |
| |
Accumulated deficit | |
| | |
| ( | |
| ( |
Total stockholders’ equity (deficit) | | $ | | | $ | ( | | $ | ( |
Class A Shares subject to possible redemption | |
| | |
| | |
| |
| | | | | | | | | |
Condensed Statement Of Operations for the Three Months Ended June 30, 2021 and the Period from February 17, 2021 Through June 30,2021 | |
|
| |
|
| |
|
|
Basic and diluted net loss per common share – Class A common stock for the three months ended June 30, 2021 | | $ | — | | $ | ( | | $ | ( |
Basic and diluted net loss per common share – Class B common stock for the three months ended June 30, 2021 | |
| ( | |
| | |
| ( |
| | | | | | | | | |
Basic and diluted net income per share for the six months ended June 30, 2021 | | $ | — | | $ | | | $ | |
Basic and diluted net income per common share – Class B common stock for the six months ended June 30, 2021 | |
| | |
| ( | |
| |
| | | | | | | | | |
Condensed Statement Of Cash Flows For The Six Months Ended June 30, 2021 | |
|
| |
|
| |
|
|
Initial value of Class A common stock subject to possible redemption, as corrected | | $ | | | $ | | | $ | |
Change in value of Class A common stock subject to possible redemption | | $ | | | $ | ( | | $ | — |
| | | | | | | | | |
Condensed Balance Sheet as of March 31, 2021 | |
|
| |
|
| |
|
|
Class A common stock, $ | | $ | | | $ | | | $ | |
Stockholders’ equity | |
|
| |
|
| |
|
|
Class A common stock - $ | |
| | |
| ( | |
| — |
Class B common stock - $ | |
| | |
| — | |
| |
Additional paid-in capital | |
| | |
| ( | |
| — |
Accumulated deficit | |
| | |
| ( | |
| ( |
Total stockholders’ equity (deficit) | | $ | | | $ | ( | | $ | ( |
Shares subject to possible redemption | |
| | |
| | |
| |
| | | | | | | | | |
Condensed Statement Of Operations for the three months ended March 31,2021 | |
|
| |
|
| |
|
|
Basic and diluted net income per common share – Class A common stock for the three months ended March 31, 2021 | | $ | — | | $ | | | $ | |
Basic and diluted net income per common share – Class B common stock for the three months ended March 31, 2021 | |
| | |
| ( | |
| |
| | | | | | | | | |
Condensed Statement Of Cash Flows For The Three Months Ended March 31, 2021 | |
|
| |
|
| |
|
|
Initial value of Class A common stock subject to possible redemption, as corrected | | $ | | | $ | | | $ | |
Change in value of Class A common stock subject to possible redemption | | $ | | | $ | ( | | $ | — |
| | | | | | | | | |
Balance Sheet as of February 11, 2020 | |
|
| |
|
| |
|
|
Class A common stock, $ | | $ | | | $ | | | $ | |
Stockholders’ equity | |
|
| |
|
| |
|
|
Class A common stock - $ | |
| | |
| ( | |
| — |
Class B common stock - $ | |
| | |
| — | |
| |
Additional paid-in capital | |
| | |
| ( | |
| — |
Accumulated deficit | |
| ( | |
| ( | |
| ( |
Total stockholders’ equity (deficit) | | $ | | | $ | ( | | $ | ( |
Class A Shares subject to possible redemption | |
| | |
| | |
| |
10
Note 3 — Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with 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, 2020 as filed with the SEC on March 31, 2021, which contains the audited financial statements and notes thereto. The interim results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 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 the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, 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 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 financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these condensed financial statements is the determination of the fair value of the warrant liability. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates.
11
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had approximately $
Marketable Securities Held in Trust Account
The Company’s portfolio of investments held in the Trust Account 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
Offering Costs associated with the Initial Public Offering
The Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) 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 Public Offering. Offering costs are charged to temporary equity or the statement of operations based on the relative value of the Public Warrants to the proceeds received from the Units sold upon the completion of the IPO. Accordingly, as of September 30, 2021, offering costs totaling $
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, Class A common stock is classified as stockholders’ equity. The Company’s Class A common stock feature certain redemption rights that is considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheet.
As of September 30, 2021, the common stock reflected on the balance sheet are reconciled in the following table:
Gross proceeds from IPO |
| $ | |
Less: | | | |
Proceeds allocated to Public Warrants | |
| ( |
Common stock issuance costs | |
| ( |
Plus: | | | |
Accretion of carrying value to redemption value | |
| |
| | | |
Contingently redeemable common stock | | $ | |
12
Net Income Per Common Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common stock outstanding for the period. The Company has two classes of common shares, which are referred to as Class A common stock and Class B common stock. Earnings and losses are shared pro rata between the two classes of stock. Private and public warrants to purchase
Below is a reconciliation of the net income per share of common stock:
| | For the three months ended | | For the nine months ended | ||||||||
| | September 30, 2021 | | September 30, 2021 | ||||||||
|
| Class A |
| Class B |
| Class A |
| Class B | ||||
Basic and diluted net income per share |
| |
|
| |
|
| |
|
| |
|
Numerator: |
| |
|
| |
|
| |
|
| |
|
Allocation of net income | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Denominator | |
|
| |
|
| |
|
| |
|
|
Weighted-average shares outstanding | |
| | |
| | |
| | |
| |
Basic and diluted net income per share | | $ | | | $ | | | $ | | | $ | |
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the condensed balance sheet, primarily due to its short-term nature, other than the derivative warrant liability.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the condensed statements of operations. Derivative assets and liabilities are classified in the condensed balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the condensed balance sheet date. The Company has determined the warrants are a derivative instrument.
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers consist of:
| ● | 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 |
13
| ● | 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. |
Income Taxes
The Company accounts for income taxes under FASB ASC 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 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. The deferred taxes were de minimums as of September 30, 2021 and December 31, 2020.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in the Company’s condensed financial statements and prescribes a recognition threshold and measurement process for financial statements 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 interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were
The Company has identified the United States as its only significant tax jurisdiction.
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.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these condensed financial statements. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt --Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging --Contracts in Entity’ Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’ Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.
The Company’s management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed financial statements.
Note 4 — Initial Public Offering
On February 11, 2021, the Company sold
14
Warrant”). Each whole Public Warrant entitles the holder thereof to purchase
The Company paid underwriting fees at the closing of the IPO of $
Warrants — Each whole warrant entitles the holder to purchase
The warrants will become exercisable on the later of
The Company has agreed that as soon as practicable, but in no event later than fifteen (
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 $ |
| ● | upon not less than |
| ● | if, and only if, the closing price of the common stock equals or exceeds $ |
15
| ● | if the last sale price of our Class A common stock is less than $ |
Note 5 — Private Placement
Simultaneously with the closing of the IPO, the Sponsor purchased an aggregate of
Each Private Placement Warrant was identical to the Public Warrants sold in the IPO, except that the Private Placement Warrants, so long as they are held by the Sponsor or its permitted transferees, (i) will not be redeemable by the Company, (ii) may not (including the Class A common stock issuable upon exercise of these warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders until
Note 6 — Related Party Transactions
Founder Shares
On December 17, 2020, the Sponsor paid $
The initial stockholders have agreed not to transfer, assign or sell any of their Founder Shares and any Class A common stock issuable upon conversion thereof until the earlier to occur of: (A)
Promissory Note – Related Party
On December 17, 2020, the Sponsor agreed to loan the Company up to $
16
loan was repaid upon the closing of the IPO out of the offering proceeds. As of September 30, 2021 and December 31, 2020, the Company had $
Working Capital Loans
The Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes the initial Business Combination, the Company would repay the Working Capital Loans. In the event that the initial Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $
Administrative Service Fee
The Company has agreed, commencing on February 8, 2021, to pay up to $
Due to Related Party
The Sponsor or an affiliate of the sponsor occasionally incurs expenses on behalf of the Company. The liability is non-interest bearing, due on demand, and as of September 30, 2021, an aggregate of $
Note 7 — Commitments and Contingencies
Underwriters Agreement
The underwriters are entitled to a deferred fee of $
Registration Rights
The holders of the founder shares, Private Placement Warrants, and warrants that may be issued upon conversion of Working Capital Loans will have registration rights to require the Company to register a sale of any of its securities held by them pursuant to a registration rights agreement to be signed in connection with the Company’s IPO. These holders will be entitled to make up to
Note 8 — Stockholders’ Deficit
Preferred Stock — The Company is authorized to issue a total of
Class A Common Stock—The Company is authorized to issue
17
Class B Common Stock — The Company is authorized to issue
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 Delaware state law 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 concurrently with or immediately following the consummation of the initial Business Combination on a
Note 9 —Recurring Fair Value Measurements
At September 30, 2021, the Company’s warrant liability was valued at $
The Company’s warrant liability for the Private Placement Warrants is based on a valuation model utilizing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. The fair value of the Private Warrant liability classified within Level 3 of the fair value hierarchy.
The Company’s warrant liability for the Public Warrants is based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. The fair value of the Public Warrant liability is classified within Level 1 of the fair value hierarchy.
Substantially all of the Company’s trust assets on the condensed balance sheet consist of U. S. Treasury Securities which are classified as cash equivalents. Fair values of these investments are determined by Level inputs utilizing quoted prices (unadjusted) in active markets for identical assets.
The following table presents information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of September 30, 2021, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
|
| Level 1 |
| Level 2 |
| Level 3 | |||
Assets: | | | | | | | | | |
Investments held in Trust Account – U.S. Treasury Securities | | $ | | | $ | — | | $ | — |
Liabilities: | | | | | | | | | |
Private Placement Warrants | | $ | — | | $ | — | | $ | |
Public Warrants | | $ | | | $ | — | | $ | — |
18
Measurement
The Company established the initial fair value for the Warrants on February 11, 2021, the date of the consummation of the Company’s IPO. On September 30, 2021 the fair value was remeasured. At September 30, 2021, the Company used a modified Black-Scholes model to value the Private Placement Warrants. The Private Placement Warrants were classified within Level 3 of the fair value hierarchy at the measurement date due to the use of unobservable inputs. The Company’s Private Placement Warrant liability is based on a valuation model utilizing management judgment and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in a material change in fair value. In April 2021, the Public Warrants began trading in the open market and were reclassified to Level 1.
The key inputs into the modified Black-Scholes model were as follows at September 30, 2021:
Input |
| September 30, 2021 | | |
Risk-free interest rate | | | | % |
Expected term (years) | |
| | |
Expected volatility | |
| | % |
Dividend rate | | | | % |
Exercise price | | $ | | |
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 for the period ended September 30, 2021.
Fair value at issuance February 11, 2021 |
| $ | |
Public Warrants reclassified to level 1(1) | | | ( |
Issuance of Private Placement Warrants upon conversion of Working Capital Loans | | | |
Change in fair value | | | ( |
Fair Value at September 30, 2021 | | | |
| (1) | Assumes the Public Warrants were reclassified on June 30, 2021. |
Note 10 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed financial statement were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.
19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “Priveterra Acquisition Corp.,” “our,” “us” or “we” refer to Priveterra 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 interim condensed 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 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. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.
Overview
We are a blank check company incorporated in Delaware on November 17, 2020. We were formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).
Our Sponsor is Priveterra Sponsor, LLC, a Delaware limited liability company. The registration statement for the Initial Public Offering was declared effective on February 8, 2021. On February 11, 2021, we consummated the Initial Public Offering of 27,600,000 Units, at $10.00 per Unit, generating gross proceeds of $276,000,000, and incurring offering costs of approximately $5,520,000, inclusive of approximately $9,660,000 in deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated the Private Placement of 5,213,333 Private Placement Warrants, at a price of $1.50 per Private Placement Warrant to our Sponsor, generating gross proceeds to us of approximately $7,820,000.
Upon the closing of the Initial Public Offering and the Private Placement, $276,000,000 ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was placed in the Trust Account and was invested in permitted United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended, 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 that invest only in direct U.S. government treasury obligations.
Our management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.
20
We will only have 24 months from the closing of the Initial Public Offering, or February 11, 2023, to complete our initial Business Combination (the “Combination Period”). If we do not complete a Business Combination within this period of time, we will (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the Public Shares for a per share pro rata portion of the Trust Account, including interest and not previously released to us to fund our working capital requirements (less taxes payable and up to $100,000 of such net interest to pay dissolution expenses) and (iii) as promptly as possible following such redemption, dissolve and liquidate the balance of our net assets to our remaining stockholders, as part of our plan of dissolution and liquidation. Our Sponsor and our executive officers and independent director nominees (the “initial stockholders”) entered into a letter agreement with us, pursuant to which they have waived their rights to participate in any redemption with respect to their Founder Shares; however, if the initial stockholders or any of our officers, directors or affiliates acquire shares of common stock in or after the Initial Public Offering, they will be entitled to a pro rata share of the Trust Account upon our redemption or liquidation in the event we do not complete a Business Combination within the required time period. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the Initial Public Offering price per Unit in the Initial Public Offering.
Liquidity and Capital Resources
As of September 30, 2021, we had $663,540 in our operating bank account and working capital of approximately $954,716 (excluding taxes payable which is funded by earnings from the Trust Account)..
Prior to the completion of the Initial Public Offering, our liquidity needs have been satisfied through a capital contribution from the Sponsor of $25,000 for the founder shares and loans under an unsecured promissory note from the Sponsor of $73,295. On February 15, 2021, we issued an unsecured convertible promissory note to our Sponsor, pursuant to which we may borrow up to $1,500,000 from our sponsor for ongoing expenses reasonably related to our business and the consummation of an initial business combination. All unpaid principal under the convertible note will be due and payable in full on the earlier of (i) February 11, 2023 and (ii) the effective date of our initial business combination. Our Sponsor will have the option, at any time on or prior to such maturity date, to convert any amounts outstanding under the convertible note into warrants to purchase shares of our Class A common stock, par value $0.0001 per share, at a conversion price of $1.50 per warrant, with each warrant entitling the holder to purchase one share of our Class A common stock at a price of $11.50 per share, subject to the same adjustments applicable to the private placement warrants sold concurrently with our initial public offering. In June 2021 we had $100,000 of Working Capital Loans outstanding which were converted into 66,667 Working Capital Warrants. As of September 30, 2021 and December 31, 2020, there were no borrowings under the Working Capital Loans.
Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, we will be using these funds to pay existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that the specific impact is not readily determinable as of the date of the balance sheet. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Results of Operations
Our entire activity since inception through September 30, 2021 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 income and dividends on investments held in Trust Account. Additionally, we will recognize unrealized gains or loss related to our Warrants. 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.
21
For the nine months ended September 30, 2021, we had net income of $7,952,957, which is driven by an unrealized gains of $9,599,733 on our warrants and $58,469 in interest income from investments held in our Trust Account. Partially offsetting our income is $1,050,199 in formation and operating costs and warrant issue costs of $655,046. For the three months ended September 30, 2021, we had net income of $5,658,942, which is driven by an unrealized gain of $6,088,400 and $21,434 in interest income from investments held in our Trust Account, partially offset by $450,892 in formation and operating costs
Contractual Obligations
Administrative Services Agreement
Commencing on the date that our securities are first listed on the Nasdaq Stock Market, we agreed to pay the Sponsor up to $25,000 per month for administrative and other services, of which $10,000 per month will be paid to the Sponsor for office space and administrative services provided to members of the management team and up to $15,000 will be used to compensate the Company’s Chief Operating Officer and Chief Financial Officer and Chief Legal Officer and Secretary for a portion of their time spent on the Company’s affairs. Upon completion of the Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees.
Registration Rights
The initial stockholders and holders of the Private Placement Warrants will be entitled to registration rights pursuant to a registration rights agreement. The initial stockholders and holders of the Private Placement Warrants will be entitled to make up to three demands, excluding short form registration demands, that register such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” 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 3,600,000 additional Units to cover any over-allotments, at the initial public offering price less the underwriting discounts and commissions. The warrants that were issued in connection with the 3,600,000 over-allotment Units are identical to the public warrants and have no net cash settlement provisions.
We paid an underwriting discount of 2% of the per Unit offering price, or approximately $5,520,000 million in the aggregate at the closing of the Initial Public Offering, and agreed to pay an additional fee (the “Deferred Underwriting Fees”) of 3.5% of the gross offering proceeds, or approximately $9,660,000 in the aggregate upon the Company’s completion of an Initial Business Combination. The Deferred Underwriting Fees will become payable to the underwriters from the amounts held in the Trust Account solely in the event the Company completes its initial Business Combination.
Critical Accounting Policies
Derivative Financial Instruments
We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. We have determined the warrants are a derivative instrument.
FASB ASC 470-20, Debt with Conversion and Other Options addresses the allocation of proceeds from the issuance of convertible debt into its equity and debt components. We apply this guidance to allocate IPO proceeds from the Units between Class A common stock and warrants, using the residual method by allocating IPO proceeds first to fair value of the warrants and then the Class A common stock.
22
Investments Held in the Trust Account
Our portfolio of investments held in the Trust Account 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, or a combination thereof. The investments held in the Trust Account are classified as trading securities. Trading securities are presented on the 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 gain on marketable securities, dividends and interest held in Trust Account in the accompanying unaudited condensed statements of operations. The estimated fair values of investments held in the Trust Account were determined using available market information.
Class A Common Stock Subject to Possible Redemption
We account for Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, Class A common stock is classified as stockholders’ equity. Our Class A common stock features certain redemption rights that is considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the condensed balance sheet.
Net Income (Loss) Per Share
We have two classes of common shares, which are referred to as Class A common stock and Class B common stock. Earnings and losses are shared pro rata between the two classes of stock. Private and public warrants to purchase 14,480,000 Class A common stock at $11.50 per share were issued on February 8, 2021. No warrants were exercised during the three or nine months ended September 30, 2021. The calculation of diluted income per common share does not consider the effect of the warrants issued in connection with the (i) IPO, (ii) exercise of over-allotment, and (iii) Private Placement since the exercise of the warrants are contingent upon the occurrence of future events. As a result, diluted net income per common share is the same as basic net income per common share for the periods. Accretion associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt --Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging --Contracts in an Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.
The Company’s management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
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.
Inflation
We do not believe that inflation had a material impact on our business, revenues or operating results during the period presented.
23
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 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 Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2021.
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter of 2021 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
24
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, filed with the SEC on August 16, 2021, which incorporates risk factors listed in our final prospectus relating to the Initial Public Offering dated February 8, 2021 filed with the SEC on February 8, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On December 17, 2020, our Sponsor purchased an aggregate of 5,750,000 founder shares for a purchase price of $25,000, or approximately $0.004 per share, of which up to 900,000 shares were subject to forfeiture if the over-allotment option was not exercised by the underwriters in full. As a result of the underwriters’ election to fully exercise of their over-allotment option, the 900,000 shares are no longer subject to forfeiture. On February 8, 2021, as part of an upsizing of our initial public offering, we effected a stock split in which each issued share of Class B common stock that was outstanding was converted into one and two tenths shares of Class B common stock, resulting in an aggregate of 6,900,000 shares of Class B common stock issued and outstanding.
Prior to the initial investment in the company of $25,000 by our Sponsor, the Company had no assets, tangible or intangible. The per share price was determined by dividing the amount of cash contributed to the company by the number of founder shares issued.
Our Sponsor is an accredited investor for purposes of Rule 501 of Regulation D. Each of the equity holders in our Sponsor is an accredited investor under Rule 501 of Regulation D. The sole business of our Sponsor is to act as the Company’s sponsor in connection with this offering. The limited liability company agreement of our Sponsor provides that its membership interests may only be transferred to our officers or directors or other persons affiliated with our Sponsor, or in connection with estate planning transfers.
Substantially concurrently with the closing of our Initial Public Offering, pursuant to the Private Placement Warrants Purchase Agreement, the Company completed the private sale of an aggregate of 5,213,333 warrants (the “Private Placement Warrants”) to our Sponsor at a purchase price of $1.50 per Private Placement Warrant, generating gross proceeds to the Company of $7,820,000. The Private Placement Warrants are identical to the Warrants sold in the Initial Public Offering, except that the Private Placement Warrants, so long as they are held by our Sponsor or its permitted transferees, (i) are not redeemable by the Company, (ii) may not (including the Class A common stock issuable upon exercise of such Private Placement Warrants), subject to certain limited exceptions, be transferred, assigned or sold by such holders until 30 days after the completion of the Company’s initial business combination, (iii) may be exercised by the holders on a cashless basis and (iv) will be entitled to registration rights. No underwriting discounts or commissions were paid with respect to such sale. The issuance of the Private Placement Warrants was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.
On June 28, 2021, the Sponsor elected to convert $100,000 of outstanding principal amount under the Working Capital Loans into, and the Company has issued, warrants to purchase 66,6666 shares of Class A common stock of the Company at a purchase price of $11.50 per share, subject to adjustment as described in the Private Placement Warrants Purchase Agreement. Such warrants are identical to the Private Placement Warrants issued to the Sponsor in connection with our Initial Public Offering. The issuance of such warrants was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
25
Item 6. Exhibits.
Exhibit |
| Description |
31.1* | | |
| | |
31.2* | | |
| | |
32.1** | | |
| | |
32.2** | | |
| | |
101.INS | | XBRL Instance Document |
| | |
101.SCH | | XBRL Taxonomy Extension Schema Document |
| | |
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document |
| | |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document |
| | |
101.LAB | | XBRL Taxonomy Extension Label Linkbase Document |
| | |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document |
| | |
104 | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
* | Filed herewith. |
** | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
26