Envoy Medical, Inc 10-Q/A for FY2021 Q3
Envoy Medical, Inc. (COCH)
About this 10-Q/A
Envoy Medical, Inc filed this 10-Q/A on January 3, 2022, 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
- $5.57M
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from to
Commission File Number -
(Exact name of registrant as specified in its charter) |
| ||
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
| | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: ( |
Securities registered pursuant to Section 12(b) of the Act:
| | | | |
Title of each class |
| Trading Symbol |
| Name of each exchange on which registered |
|
| |||
|
| |||
|
|
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. Yes ☐
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, a 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 December 30, 2021, the registrant had
EXPLANATORY NOTE
Anzu Special Acquisition Corp I (the “Company,” “we,” “us” or “our”) is filing this Amendment No. 1 on Form 10-Q/A (this “Amendment”) to amend and restate certain items in its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021, originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on November 12, 2021.
Background of Restatement
In connection with the change in presentation for shares of Class A common stock subject to possible redemption in the Company’s financial statements for the quarter ended September 30, 2021, the Company re-evaluated its accounting of the public shares (as defined below). As a result, the Company determined that at the closing of the Initial Public Offering (as defined below), it had improperly valued the public shares. The Company previously determined the public shares subject to possible redemption to be equal to the redemption value of $10.00 per share while also taking into consideration a redemption cannot result in net tangible assets being less than $5,000,001. Management determined that all public shares can be redeemed or become redeemable subject to the occurrence of future events considered outside the Company’s control. Therefore, management concluded that the redemption value should include all public shares subject to possible redemption, resulting in the shares of Class A common stock subject to possible redemption being equal to their redemption value. As a result, management has noted an error related to temporary equity and permanent equity. This resulted in an adjustment to the initial carrying value of the Class A common stock subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and Class A common stock.
On December 2, 2021, the audit committee of the board of directors of the Company concluded, after discussion with the Company’s management, that it is appropriate to restate the Company’s previously (i) unaudited interim financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021, (ii) unaudited interim financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021, and (iii) unaudited interim financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021 (such periods, collectively, the “Affected Periods”). Considering the restatement of such financial statements, the Company concluded that the financial statements for the Affected Periods should no longer be relied upon. This Amendment includes restatements of the financial statements for the Affected Periods.
In connection with the change in presentation for the shares of Class A common stock subject to redemption, the Company also restated its earnings per share calculation to allocate net income (loss) pro-rata to shares of Class A common stock subject to possible redemption, shares of Class A common stock and shares of Class B common stock. This presentation contemplates a business combination as the most likely outcome, in which case all classes of common stock share pro-rata in the net income (loss) of the Company.
Effects of Restatement
As a result of the factors described above, the Company has included in this Amendment a restatement of its financial statements for the Affected Periods. See Note 2 to the Notes to Financial Statements included in Part I, Item 1 of this Amendment for additional information on the restatement and the related financial statement effects. These changes do not impact the Company’s cash position or cash held in the Trust Account established in connection with the Initial Public Offering.
Internal Control Considerations
The Company’s management has concluded that in light of the classification error described above, a material weakness exists in the Company’s internal control over financial reporting and that the Company’s disclosure controls and procedures were not effective. For a discussion of management’s consideration of the material weakness identified, see Part I, Item 4, Controls and Procedures of this Amendment.
ANZU SPECIAL ACQUISITION CORP I
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Anzu Special Acquisition Corp I
Condensed Balance Sheets
|
| September 30, 2021 |
| December 31, 2020 | ||
ASSETS: | | (unaudited) | | | ||
Current Assets: | | | | | | |
Cash and cash equivalent | | $ | | | $ | |
Prepaid Expenses | |
| | |
| — |
Total Current Assets | | | | | | |
Investments held in Trust Account | | | | | | — |
Deferred offering costs associated with proposed public offering | | | — | | | |
Total assets | | $ | | | $ | |
| | | | | | |
Liabilities and Stockholders’ Equity | |
|
| |
|
|
Current liabilities: | | | | | | |
Accounts payable | | $ | | | $ | |
Accrued Expenses | | | | | | — |
Total current liabilities | | | | | | |
Deferred underwriting fee payable | |
| | |
| — |
Derivative warrant liability | |
| | |
| — |
Total liabilities | |
| | |
| |
| |
|
| |
|
|
Commitments and Contingencies | |
|
| |
|
|
| | | | | | |
Class A common stock, $ | | | | | | — |
| |
|
| |
|
|
Stockholders’ Equity | |
|
| |
|
|
Preferred stock, $ | |
| |
| ||
Class A common stock, $ | |
| — | |
| — |
Class B common stock, $ | |
| | |
| |
Additional paid-in capital | |
| — | |
| |
Retained earnings (accumulated deficit) | |
| ( | |
| ( |
Total stockholders’ equity | |
| ( | |
| |
Total liabilities and stockholders’ equity | | $ | | | $ | |
See accompanying notes to unaudited condensed financial statements.
1
Anzu Special Acquisition Corp I
Condensed Statements of Operations
For the three and nine months ended September 30, 2021
(Unaudited)
| | Three Months Ended | | Nine Months Ended | ||
| | September 30, | | September 30, | ||
|
| 2021 |
| 2021 | ||
| | | | | | |
Operating expenses: | | | | | | |
Formation and Operating Costs | | $ | | | $ | |
Loss from operations | | $ | ( | | $ | ( |
| | | | | | |
Other income (expense): | | | | | | |
Interest earned on marketable securities held in Trust Account | | $ | | | $ | |
Offering costs allocated to warrant liabilities | | | — | | | ( |
Change in fair value of warrant liabilities | | | | | | |
Net Income | | | | | | |
| |
| | |
| |
Weighted average number of Class A common stock, basic and diluted | |
| | |
| |
Basic and diluted net income (loss) per common stock, Class A | | $ | | | $ | |
Weighted average shares outstanding of Class B common stock, basic | | | | | | |
Basic net income (loss) per common stock, Class B | | $ | | | $ | |
Weighted average shares outstanding of Class B common stock, diluted | |
| | |
| |
Diluted net income (loss) per common stock, Class B | | $ | | | $ | |
See accompanying notes to unaudited condensed financial statements.
2
Anzu Special Acquisition Corp I
Condensed Statements of Changes in Stockholders’ Equity
(Unaudited)
| | Three Months Ended September 30, 2021 | |||||||||||||||||
| | | | | | | | | | | | Additional | | | | | | ||
| | Class A Common Stock | | Class B Common Stock | | Paid-in | | Accumulated | | Stockholders’ | |||||||||
|
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity | |||||
Balance as of June 30, 2021 | | — | | $ | — | | | | $ | | | $ | | | $ | ( | | $ | ( |
Net Income | | — | | | — | | — | | | — | | | | | | | | | |
Balance as of September 30, 2021 | | — | | $ | — | | | | $ | | | $ | | | $ | ( | | $ | ( |
| | Nine Months Ended September 30, 2021 | |||||||||||||||||
| | | | | | Additional | | | | | | ||||||||
| | Class A Common Stock | | Class B Common Stock | | Paid-in | | Accumulated | | Stockholders’ | |||||||||
|
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity | |||||
Balance as of December 31, 2020 | | — | | $ | — | | | | $ | | | $ | | | $ | ( | | $ | |
Forfeiture of Founder Shares |
| — | |
| — | | ( | | | ( | |
| | |
| — | |
| — |
Accretion for Class A common stock to redemption amount | | — | | | — | | — | | | — | | | ( | | | ( | | | ( |
Net Income | | — | | | — | | — | | | — | | | — | | | | | | |
Balance as of September 30, 2021 | | — | | $ | — | | | | $ | | | $ | — | | $ | ( | | $ | ( |
See accompanying notes to unaudited condensed financial statements.
3
ANZU SPECIAL ACQUISITION CORP I
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
| | Nine Months Ended | |
| | September 30, | |
| | 2021 | |
| | | |
Cash flow from operating activities: |
|
| |
Net income | | $ | |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| |
Amortization of prepaid expense | | | |
Change in fair value of warrant liabilities | | | ( |
Offering costs allocated to warrant liabilities | | | |
Interest earned on marketable securities held in Trust Account | |
| ( |
Changes in operating assets and liabilities: | | | |
Prepaid expenses | |
| ( |
Accounts payable | | | |
Accrued expenses | |
| |
Net cash used in operating activities | | | ( |
| | | |
Cash flows from investing activities: | | | |
Investment of cash in Trust Account | | | ( |
Net cash used in investing activities | | | ( |
Cash flows from financing activities: | |
|
|
Proceeds from sale of Units, Gross | | | |
Proceeds from sale of Private Placement Warrants | |
| |
Payment of offering costs | | | ( |
Net cash provided by financing activities | |
| |
| |
|
|
Net increase in cash | |
| |
Cash at beginning of period | |
| |
Cash at end of period | | $ | |
| | | |
Supplemental disclosure of non-cash financing activities: | |
| |
Deferred underwriting fees payable | | $ | |
See accompanying notes to interim condensed financial statements.
4
Anzu Special Acquisition Corp I
Notes to Condensed Financial Statements
Unaudited
Note 1 - Organization and Business Operations
Organization and General
Anzu Special Acquisition Corp I (the “Company”) is a blank check company incorporated as a Delaware corporation on December 28, 2020 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with
While the Company may pursue a Business Combination target in any industry, the Company currently intends to concentrate its efforts in identifying high-quality businesses with transformative technologies for industrial applications. Since completing the Company’s initial public offering (the “IPO” or the “Initial Public Offering”), the Company has reviewed, and continues to review, a number of opportunities to enter into a Business Combination with an operating business, but the Company is not able to determine at this time whether it will complete a Business Combination with any of the target businesses that the Company has reviewed or with any other target business. The Company intends to effectuate a Business Combination using cash from the proceeds of the IPO and the sale of the Private Placement Warrants (as defined below), the Company’s capital stock, debt, or a combination of cash, stock and debt.
As of September 30, 2021, the Company had not commenced any operations. All activity for the period from December 28, 2020 (inception) through September 30, 2021 relates to organizational activities and those necessary to identifying and evaluating prospective acquisition candidates for a Business Combination. The Company does not expect to generate any operating revenues until after the completion of a Business Combination. The Company generates non-operating income in the form of interest income on marketable securities held in the Trust Account (as defined below).
The Company’s sponsor is Anzu SPAC GP I LLC, a Delaware limited liability company (the “Sponsor”).
Financing
On March 4, 2021, the Company consummated the IPO of
Simultaneously with the closing of the IPO, the Company completed the private sale (the “Private Placement”) of
Transaction costs of the IPO prior to the underwriters’ partial exercise of their over-allotment option amounted to $
5
Anzu Special Acquisition Corp I
Notes to Interim Condensed Financial Statements
Unaudited
Trust Account
Following the closing of the IPO on March 4, 2021, $
Business Combination
The Company’s management has broad discretion with respect to the specific application of the net proceeds from the IPO, although substantially all of the net proceeds from the IPO are intended to be generally applied toward consummating a Business Combination with (or acquisition of) a Target Business. As used herein, “Target Business” means one or more target businesses that together have an aggregate fair market value equal to at least
The Company will provide its public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of a Business Combination, either (i) in connection with a stockholder meeting called to approve such Business Combination or (ii) by means of a tender offer. The public stockholders will be entitled to redeem their shares for a pro rata portion of the amount held in the Trust Account, calculated as of business days prior to the completion of a Business Combination, including any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations. The per-share amount to be distributed to the public stockholders who redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 7). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants. As a result, shares of common stock were recorded at their redemption amount and classified as temporary equity upon the completion of the IPO, in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”).
The decision as to whether the Company will seek stockholder approval of a Business Combination or will allow stockholders to sell their shares in a tender offer will be made by the Company, in its sole discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require the Company to seek stockholder approval unless a vote is required by law or stock exchange listing requirements. If the Company seeks stockholder approval, it will complete its Business Combination only if a majority of the shares of common stock voted are voted in favor of a Business Combination. However, in no event will the Company redeem its public shares in an amount that would cause its net tangible assets to be less than $
6
Anzu Special Acquisition Corp I
Notes to Interim Condensed Financial Statements
Unaudited
The Company has until March 4, 2023 (or such longer period as provided in an amendment to the Company’s amended and restated certificate of incorporation approved by the Company’s stockholders (an “Extension Period”)) to complete its initial Business Combination. If the Company does not complete a Business Combination by March 4, 2023, or during any Extension Period, it shall (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible but not more than business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (less up to $
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 Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party (other than the Company’s independent registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $
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 unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Liquidity
As of September 30, 2021, the Company had approximately $
7
Anzu Special Acquisition Corp I
Notes to Interim Condensed Financial Statements
Unaudited
Prior to the completion of the Initial Public Offering, the Company’s liquidity needs had been satisfied through a contribution of $
The Company may need to raise additional funds through loans from its Sponsor and/or third parties in order to meet the expenditures required for operating its business. If the Company’s estimate of the costs of undertaking in-depth due diligence and negotiating the initial business combination is less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to the initial business combination. The Sponsor is not under any obligation to advance funds to, or to invest in, the Company. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of its business plan, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern through one year from the date of these unaudited condensed financial statements if a Business Combination is not consummated. These unaudited condensed financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 2 – Restatement of Previously Issued Financial Statements
In preparation of the Company’s unaudited condensed financial statements as of and for quarterly period ended September 30, 2021, the Company concluded it should revise its previously issued financial statements to classify all Class A common stock subject to possible redemption in temporary equity and, subsequent to the quarterly period ended September 30, 2021, the Company reconsidered to restate its previously issued financial statements. In accordance with ASC 480, paragraph 10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity.
The Company previously determined the Class A common stock subject to possible redemption to be equal to the redemption value of $
The Company has restated the unaudited condensed financial statements for the affected interim periods ended June 30, 2021 and March 31, 2021 in this report.
There has been no change in the Company’s total assets, liabilities, or operating results.
8
Anzu Special Acquisition Corp I
Notes to Interim Condensed Financial Statements
Unaudited
The impact of the revision on the Company’s financial statements is reflected in the following tables.
| | As Previously | | | | | |||
|
| Reported |
| Adjustment |
| Restated | |||
Balance Sheet as of March 31, 2021 (unaudited) | | | | | | | | | |
Common stock subject to possible redemption | | $ | | | $ | | | $ | |
Class A | | $ | | | $ | ( | | $ | — |
Class B | | $ | | | $ | — | | $ | |
Additional paid-in capital | | $ | | | $ | ( | | $ | — |
Retained earnings (Accumulated deficit) | | $ | ( | | $ | ( | | $ | ( |
Total Stockholders’ Equity | | $ | | | $ | ( | | $ | ( |
| | | | | | | | | |
Balance Sheet as of June 30, 2021 (unaudited) | | | | | | | | | |
Common stock subject to possible redemption | | $ | | | $ | | | $ | |
Class A | | $ | | | $ | ( | | $ | — |
Class B | | $ | | | $ | — | | $ | |
Additional paid-in capital | | $ | | | $ | ( | | $ | — |
Retained earnings (Accumulated deficit) | | $ | ( | | $ | ( | | $ | ( |
Total Stockholders’ Equity | | $ | | | $ | ( | | $ | ( |
|
| As Previously |
|
| |
|
| | |
| | Reported | | Adjustment | | Restated | |||
Cash Flow Statement Three Months Ended March 31, 2021 (unaudited) |
| |
|
| |
|
| |
|
Initial classification of Class A common stock | | $ | | | $ | ( | | $ | — |
| | | | | | | | | |
Cash Flow Statement Six Months Ended June 30, 2021 (unaudited) | |
|
| |
|
| |
|
|
Initial classification of Class A common stock | | $ | | | $ | ( | | $ | — |
Change in value of Class A common stock | | $ | | | $ | ( | | $ | — |
In connection with the change in presentation for the Class A common stock subject to possible redemption, the Company also restated 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
Anzu Special Acquisition Corp I
Notes to Interim Condensed Financial Statements
Unaudited
|
| As Previously |
|
| |
|
| | |
| | Reported | | Adjustment | | As Restated | |||
Three Months Ended March 31, 2021 (unaudited) |
| |
|
| |
|
| |
|
Basic and diluted weighted average shares outstanding, Class A common stock |
| | |
| | ( |
| | |
Basic and diluted net income (loss) per share, Class A common stock | | $ | — | | ( | | ( | ||
Basic and diluted weighted average shares outstanding, Class B common stock | |
| | |
| — | |
| |
Basic and diluted net income (loss) per share, Class B common stock | | ( | | | | ( | |||
| | | | | | | | | |
Three Months Ended June 30, 2021 (unaudited) | |
|
| |
|
| |
|
|
Basic and diluted weighted average shares outstanding, Class A common stock | |
| | |
| | |
| |
Basic and diluted net income (loss) per share, Class A common stock | | $ | — | | | | | ||
Basic weighted average shares outstanding, Class B common stock | |
| | |
| ( | |
| |
Basic net income (loss) per share, Class B common stock | | $ | | | $ | ( | | $ | |
Diluted weighted average shares outstanding, Class B common stock | | | | | | — | | | |
Diluted net income (loss) per share, Class B common stock | | $ | | | $ | ( | | $ | |
| | | | | | | | | |
Six Months Ended June 30, 2021 (unaudited) | |
|
| |
|
| |
|
|
Basic and diluted weighted average shares outstanding, Class A common stock | |
| | |
| ( | |
| |
Basic and diluted net income (loss) per share, Class A common stock | | $ | — | | ( | | ( | ||
Basic and diluted weighted average shares outstanding, Class B common stock | |
| | |
| — | |
| |
Basic and diluted net income (loss) per share, Class B common stock | | ( | | | | ( | |||
Note 3 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the SEC, and reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position as of September 30, 2021 and the results of operations and cash flows for the periods presented. Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of results that may be expected for the full year or any other period.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (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 financial statements with another public company which is either not an emerging growth company or an emerging growth company
10
Anzu Special Acquisition Corp I
Notes to Interim Condensed Financial Statements
Unaudited
which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of unaudited condensed financial statement in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statement and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgement. 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 unaudited condensed financial statement, which management considered in formulating its estimate, could change in the near term one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
One of the more significant accounting estimates included in these unaudited condensed financial statements is the determination of the fair value of the warrant liabilities. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates.
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 $
Cash Held in Trust Account
The Company’s portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities and are recognized at fair value. When the Company’s investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Gains and losses resulting from the change in fair value of these securities are included in gain on investments held in the Trust Account in the accompanying unaudited condensed statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Corporation limit of $250,000. At September 30, 2021 and December 31, 2020, the Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Class A common stock are classified as shareholders’ equity. The Company’s Class A common stock feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, at September
11
Anzu Special Acquisition Corp I
Notes to Interim Condensed Financial Statements
Unaudited
30, 2021, Class A common stock subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet. There were no Class A common stock issued or outstanding as of December 31, 2020.
The Company has elected to recognize changes in the redemption value immediately as they occur and adjust the carrying value of the security to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security. Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount. The change in the carrying value of redeemable shares of Class A common stock resulted in charges against additional paid-in capital and accumulated deficit. For additional information please refer to Note 2.
Offering Costs Associated with the Initial Public Offering
The Company complies with the requirements of 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 IPO and were charged to stockholders’ equity upon the completion of the IPO. Accordingly, as of September 30, 2021, offering costs in the aggregate of $
The Company allocates the offering costs between its common stock and Public Warrants using relative fair value method, with the offering costs allocated to the Public Warrants expensed immediately. Accordingly, as of September 30, 2021, offering costs in the aggregate of $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. US GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest
12
Anzu Special Acquisition Corp I
Notes to Interim Condensed Financial Statements
Unaudited
level input that is significant to the fair value measurement. The Company’s public warrant liability is based on quoted prices in active markets as of the measurement date and is classified as Level 1.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. 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”. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the unaudited condensed statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative 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.
The Company accounts for its warrants issued in connection with its IPO as derivative warrant liabilities in accordance with ASC 815-40. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s unaudited condensed statements of operations. The fair value of warrants issued by the Company in connection with the IPO and Private Placement has been estimated using Monte-Carlo simulations at the date of issuance. As of September 30, 2021, the Company’s public warrants were measured based on quoted prices in active markets, and the private placement warrants were measured based on unobservable inputs in which little or no market data exists.
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. The Company applied this guidance to allocate IPO proceeds from the Units between common stock and warrants, using the residual method by allocating IPO proceeds first to fair value of the warrants and then common stock.
Net Loss Per Common Share
The Company complies with accounting and disclosure requirements of ASC Topic 260, “Earnings Per Share.” Net loss per share is computed by dividing net loss by the weighted average number of common stock outstanding during the period, excluding common stock shares subject to forfeiture.
The Company’s unaudited condensed statements of operations includes a presentation of income (loss) per share for shares of common stock subject to possible redemption in a manner similar to the two-class method of income (loss) per share. Consistent with ASC Topic 480-10-S99-3A, accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates its fair value. The calculation of diluted income per common share does not consider the effect of the warrants issued since the exercise of the warrants are contingent upon the occurrence of future events. However, the diluted earnings per share calculation includes the shares subject to forfeiture from the first day of the interim period in which the contingency on such shares was resolved.
A reconciliation of net income (loss) per common stock is as follows:
| | Three Months Ending 9/30/21 | | Nine Months Ending 9/30/21 | ||||||||
|
| Class A |
| Class B |
| Class A |
| Class B | ||||
Allocation of net income (loss) |
| $ | |
| $ | |
| $ | |
| $ | |
Weighted average shares outstanding, basic |
| | |
| | |
| | |
| | |
Basic net income (loss) per share | | $ | | | $ | | | $ | | | $ | |
Weighted average shares outstanding, diluted | | | | | | | | | | | | |
Diluted net income (loss) per share | | $ | | | $ | | | $ | | | $ | |
13
Anzu Special Acquisition Corp I
Notes to Interim Condensed Financial Statements
Unaudited
Income Taxes
The Company accounts for income taxes under 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 financial statement 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 tax provision for the three and nine months ended September 30, 2021 has been deemed to be de minimis, as well as the deferred tax assets as of September 30, 2021 and December 31, 2020.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in 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 “major” 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.
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standard Update (“ASU”) No. 2020-06, “Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in 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 2020-06 also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it also simplifies the diluted earnings per share calculation in certain areas. ASU2020-06 is effective for fiscal years beginning after December 15, 2023, and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently assessing the impact, if any, that ASU2020-06 would have on its 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 updates, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
Note 4 - Initial Public Offering
On March 4, 2021, the Company consummated the IPO of
The underwriters had a
14
Anzu Special Acquisition Corp I
Notes to Interim Condensed Financial Statements
Unaudited
Note 5 - Private Placement
Simultaneously with the closing of the IPO on March 4, 2021, the Company completed the private sale of an aggregate of
The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable, or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.
Additionally, the Private Placement Warrants are exercisable on a cashless basis and are non-redeemable, except as described above, so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Note 6 - Related Party Transactions
Founder Shares
On December 30, 2020, the Sponsor purchased
The Sponsor and the Company’s officers and directors have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares or Class A common stock received upon conversion thereof until the earlier of: (A)
Promissory Note — Related Party
On December 30, 2020, the Company issued an unsecured promissory note to the Sponsor (the “Promissory Note”), pursuant to which the Company could borrow up to an aggregate principal amount of $
15
Anzu Special Acquisition Corp I
Notes to Interim Condensed Financial Statements
Unaudited
Working Capital Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor, 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”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest, or, at the lender’s discretion, up to $
Administrative Service Fee
The Company has agreed, commencing on March 1, 2021, to pay an affiliate of the Company’s Sponsor a fixed amount of $
Note 7 - Commitments and Contingencies
Registration and Shareholder Rights
The holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued on conversion of Working Capital Loans (and any Class A common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) are entitled to registration rights pursuant to a registration rights agreement requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to the Company’s Class A common stock). The holders of these securities are entitled to make up to three demands, excluding short form registration demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not be required to effect or permit any registration or cause any registration statement to become effective until termination of the applicable lock-up period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters had a 45-day option from the date of the IPO to purchase up to an additional
On March 4, 2021 and April 14, 2021, the underwriters were paid a fixed underwriting discount of $
16
Anzu Special Acquisition Corp I
Notes to Interim Condensed Financial Statements
Unaudited
Note 8 - Class A Common stock Subject to Possible Redemption
The Company’s Class A common stock feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of future events. The Company is authorized to issue
At September 30, 2021, the Class A common stock reflected in the condensed balance sheets are reconciled in the following table:
Gross proceeds |
| $ | |
Less: |
| |
|
Proceeds allocated to Public Warrants |
| | ( |
Class A common stock issuance costs |
| | ( |
Plus: |
| |
|
Accretion of carrying value to redemption value |
| | |
Class A common stock subject to possible redemption | | $ | |
Note 9 - Stockholders’ Equity
Preferred Stock — The Company is authorized to issue
Class A Common Stock — The Company is authorized to issue
Class B Common Stock — The Company is authorized to issue
Only holders of the Class B common stock have the right to vote on the election of directors prior to a Business Combination. 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 otherwise required by law.
17
Anzu Special Acquisition Corp I
Notes to Interim Condensed Financial Statements
Unaudited
The Class B common stock will automatically convert into Class A common stock at the time of the completion of a Business Combination, or earlier at the option of the holder, on a
Note 10 – Fair Value Measurements
Level 1 assets include investments in money market funds that invest solely in U.S. Government securities. The Company uses inputs such as actual trade data, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.
Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. The estimated fair value of Public Warrants was transferred from a Level 3 measurement to a Level 1 measurement, when the Public Warrants were separately listed and traded in an active market in April 2021. The estimated fair value of the Private Warrants was transferred from a Level 3 measurement to a Level 2 fair value measurement as of July 2021, as the transfer of Private Placement Warrants to anyone who is not a permitted transferee would result in the Private Placement Warrants having substantially the same terms as the Public Warrants, the Company determined that the fair value of each Private Placement Warrant is equivalent to that of each Public Warrant. As of September 30, 2021, total of $
The initial fair value of the Public and Private Placement Warrants, issued concurrently and in connection with the Initial Public Offering, has been estimated using a binomial lattice model. For periods subsequent to the detachment of the Public Warrants from the Units, the Public Warrants’ listed price in an active market was used as the fair value. The estimated fair value of the Warrants, prior to the Public Warrants being traded in an active market, is determined using Level 3 inputs. Inherent in a binomial lattice model are assumptions related to the Unit price, expected volatility, risk-free interest rate, term to expiration, and dividend yield. The Unit price is based on the publicly traded price of the Units as of the measurement date. The Company estimated the volatility for the Warrants based on the implied volatility from the traded prices of warrants issued by other special purpose acquisition companies. The risk-free interest rate is based on interpolated U.S. Treasury rates, commensurate with a similar term to the Warrants. The term to expiration was calculated as the contractual term of the Warrants, assuming one year to a Business Combination from the Initial Public Offering date. Finally, the Company does not anticipate paying a dividend.
The following table presents information about the Company’s assets that are measured on a recurring basis as of September 30, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
| | | |
| | | | | |
| | Quoted Prices | | Significant | | Significant | |||
| | in Active | | Other | | Other | |||
| | Markets | | Observable | | Unobservable | |||
September 30, 2021 |
| (Level 1) |
| (Level 2) |
| (Level 3) | |||
Assets: |
| |
|
|
|
| | |
|
Investments held in Trust Account | | $ | |
| $ | — | | $ | — |
Fair Value at September 30, 2021 | | $ | |
| $ | — | | $ | — |
Liabilities: | |
|
|
|
|
| |
|
|
Public Warrant liability | | $ | |
| $ | — | | $ | — |
Private Warrant liability | | $ | — |
| $ | | | $ | — |
Fair Value at September 30, 2021 | | $ | |
| $ | | | $ | — |
18
Anzu Special Acquisition Corp I
Notes to Interim Condensed Financial Statements
Unaudited
The following table provides the rollforward for the Level 3 investments as of September 30, 2021:
Warrant liabilities at March 4, 2021 |
| $ | |
Change in fair value of warrant liabilities | |
| |
Warrant liabilities at March 31, 2021 | | $ | |
Transfers from Level 3 to Level 1 investments | |
| ( |
Warrants Issued on April 12, 2021 | | $ | |
Change in fair value of warrant liabilities | | | ( |
Warrant liabilities at June 30, 2021 | | $ | |
Change in fair value of warrant liabilities | |
| ( |
Transfer from Level 3 to Level 2 investments | | | ( |
Warrant liabilities at September 30, 2021 | | $ | |
Note 11 - Warrant Liability
Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of (a)
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, except as described below, the warrants will not be adjusted for issuances of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination by March 4, 2023, or during any Extension Period, and the Company liquidates the funds held in the Trust Account, holders of the warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution form the Company’s assets held outside the Trust Account with respect to such warrants. Accordingly, the warrants may expire worthless.
In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of the Company’s initial Business Combination at an issue price or effective issue price of less than $
19
Anzu Special Acquisition Corp I
Notes to Interim Condensed Financial Statements
Unaudited
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the Public Warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration or a valid exemption from registration is available. No Public Warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their Public Warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available.
The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, it will use its commercially reasonable efforts to file with the SEC a registration statement registering the issuance, under the Securities Act, of the Class A common stock issuable upon exercise of the Public Warrants. The Company will use its commercially reasonable efforts to cause the same to become effective within 60 business days after the closing of a Business Combination and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Public Warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if the Class A common stock is, at the time of any exercise of a Public Warrant, not listed on a national securities exchange such that they do not satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their Public Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption of warrants when the price per share of the Company’s Class A common stock equals or exceeds $
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon not less than |
| ● | if, and only if, the last reported sale price of shares of the Class A common stock for any trading days within a -trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders (the “Reference Value”) equals or exceeds $ |
Redemption of warrants when the price per share of the Company’s Class A common stock equals or exceeds $
| ● | in whole and not in part; |
| ● | at $ |
| ● | if, and only if, the Reference Value equals or exceeds $ |
| ● | if the Reference Value is less than $ |
If and when the Public Warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
20
Anzu Special Acquisition Corp I
Notes to Interim Condensed Financial Statements
Unaudited
The warrant agreement contains an alternative issuance provision that if less than
The Company has outstanding an aggregate of
The Company believes that the adjustments to the exercise price of the warrants is based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under ASC 815–40, and thus the warrants are not eligible for an exception from derivative accounting.
The accounting treatment of derivative financial instruments requires that the Company record a derivative liability upon the closing of IPO. Accordingly, the Company has classified each warrant as a liability at its fair value and the warrants were allocated a portion of the proceeds from the issuance of the Units equal to its fair value determined by the Monte Carlo simulation. This liability is subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s unaudited condensed statements of operations. The Company will reassess the classification at each balance sheet date. If the classification changes as a result of events during the period, the warrants will be reclassified as of the date of the event that causes the reclassification. As such, the Company recorded $
The change in fair value of the warrant liabilities is summarized as follows:
Warrant liabilities at March 4, 2021 |
| $ | |
Change in fair value of warrant liabilities | |
| |
Warrant liabilities at March 31, 2021 | |
| |
Warrants Issued on April 12, 2021 | |
| |
Change in fair value of warrant liabilities | |
| ( |
Warrant liabilities at June 30, 2021 | |
| |
Change in fair value of warrant liabilities | |
| ( |
Warrant liabilities at September 30, 2021 | | $ | |
The estimated fair value of the public warrant liability is based on quoted prices in active markets as of the measurement date. The estimated fair value of the private warrant liability is determined using public price.
21
Anzu Special Acquisition Corp I
Notes to Interim Condensed Financial Statements
Unaudited
Note 12 - Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date that the unaudited condensed financial statements were issued. Based on this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this quarterly report on Form 10-Q (the “Quarterly Report”) to “we,” “our,” “us,” and “Company” refer to Anzu Special Acquisition Corp I. References to our “management” or our “management team” refer to our officers and directors, and references to our “Sponsor” refer to Anzu SPAC GP I LLC. 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.
This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” gives effect to the restatement of our financial statements, as discussed in Note 2 – Restatement of Previously Issued Financial Statements to our condensed financial statements included in this report. For further detail regarding the restatement, see “Explanatory Note” and Part I, Item 4. Controls and Procedures.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and variations thereof and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its initial public offering (our “IPO”), which was filed with the Securities and Exchange Commission (the “SEC”) on March 3, 2021, and in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021. Except as expressly required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated as a Delaware corporation on December 28, 2020 for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to as a Business Combination. We completed our IPO on March 4, 2021, which is described below under “Liquidity and Capital Resources.”
While we may pursue a Business Combination target in any industry, we currently intend to concentrate our efforts in identifying high-quality businesses with transformative technologies for industrial applications. Within this focus, we will seek to pursue opportunities with market-leading companies, including from corporate spinouts, closely-held companies, and institutionally-backed businesses. We believe we will be able to provide significant value due to our ability to drive growth, global scaling and profitability in companies, along with our flexibility in understanding and addressing complex business situations and structures.
Since completing our IPO, we have reviewed, and continue to review, a number of opportunities to enter into a Business Combination with an operating business, but we are not able to determine at this time whether we will complete a Business Combination with any of the target businesses that we have reviewed or with any other target business. We intend to effectuate a Business Combination using cash from the proceeds of our IPO and the sale of the Private Placement Warrants (as defined below), our capital stock, debt, or a combination of cash, stock and debt.
23
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities for the three-months ended September 30, 2021 were organizational activities and those necessary to prepare for the Initial Public Offering, described below. We do not expect to generate any operating revenues until after the completion of our initial business combination. We expect to generate non-operating income in the form of interest income on marketable securities held after our initial public offering. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the nine months ended September 30, 2021, we had a net income of $4,467,810, which consists of operating costs of $4,241,065, further contribute by offering costs allocated to warrant liabilities of $782,812, offset by change in fair value of warrant liability of $9,463,001, and interest income earned on marketable securities held in the Trust Account of $28,686.
For the three months ended September 30, 2021, we had a net income of $5,567,102, which consists of operating costs of $2,986,458, offset by change in fair value of warrant liability of $8,548,091, and interest income earned on marketable securities held in the Trust Account of $5,469.
Liquidity and Capital Resources
As of September 30, 2021, we had $1,032,015 in our operating bank account and negative working capital of $851,101.
Our liquidity needs up to the completion of our IPO on March 4, 2021 had been satisfied through a payment from our Sponsor of $25,000 for 7,187,500 shares (the “Founder Shares”) of our Class B common stock and an aggregate of $212,487 in advances from a related party. These advances were repaid and are no longer available.
On March 4, 2021, we consummated our IPO of 42,000,000 units (the “Units”) and, on April 14, 2021, we issued an additional 500,000 Units in connection with the underwriters’ partial exercise of their over-allotment option. The Units were sold at a price of $10.00 per Unit, generating aggregate gross proceeds of $425,000,000. Simultaneously with the closing of our IPO, we consummated the sale of 12,400,000 warrants (the “Private Placement Warrants”) to our Sponsor and, on April 14, 2021, simultaneously with the closing of the underwriters’ over-allotment option, we issued an additional 100,000 Private Placement Warrants to our Sponsor. The Private Placement Warrants were sold at a price of $1.00 per Private Placement Warrant, generating aggregate gross proceeds of $12,500,000.
Following the IPO, the partial exercise of the over-allotment option and the sale of the Private Placement Warrants, a total of $425,000,000 of the net proceeds from the sale of the Units and Private Placement Warrants was deposited in a U.S.-based trust account (the “Trust Account”) established for the benefit of the Company’s public stockholders maintained by American Stock Transfer & Trust Company, acting as trustee. Transaction costs of the IPO (including costs related to the closing of the underwriters’ over-allotment option) amounted to $24,012,335 consisting of $8,500,000 of underwriting discounts and commissions, $14,875,000 of deferred underwriting discounts commissions and $637,335 of other offering costs. In addition, as of September 30, 2021, $1,032,015 of cash was held outside of the Trust Account and is available for working capital purposes.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account, which interest shall be net of taxes payable and excluding deferred underwriting commissions, to complete our Business Combination. We may make permitted withdrawals from the Trust Account to pay our taxes, including franchise taxes and income taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our 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.
We intend to use funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a Business Combination, and to pay taxes to the extent the interest earned on the Trust Account is not sufficient to pay our taxes.
24
In order to fund working capital deficiencies or finance transaction costs in connection with an intended 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 required. If we complete our Business Combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. Otherwise, such loans may be repaid only out of funds held outside the Trust Account. In the event that our 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 to repay such loaned amounts. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants issued to our Sponsor. As of September 30, 2021, there were no amounts outstanding under any such working capital loans.
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 a 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 Business Combination or because we become obligated to redeem a significant number of our public shares upon completion of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2021. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of our Sponsor a monthly fee of $40,251 for office space, administrative and support services, provided to the Company. We began incurring these fees on March 1, 2021 and will continue to incur these fees monthly until the earlier of the completion of a Business Combination and the Company’s liquidation.
The underwriters are entitled to a deferred discount of $0.35 per unit, or $14,875,000 in the aggregate. The deferred discount will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of unaudited condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“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 unaudited condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified any critical accounting policies.
Warrant Liabilities
We account for the warrants issued in connection with our Initial Public Offering in accordance with the guidance contained in ASC 815 under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the warrants as liabilities at their fair value and adjust the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our unaudited condensed statements of operations. For periods subsequent to the detachment of the Public Warrants from the Units, the close price of the Public Warrant price was used as the fair value of the Public Warrants as of each relevant date.
25
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. Class A common stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, common stock are classified as shareholders’ equity. Our common stock feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of our condensed balance sheets. The Company has elected to recognize changes in the redemption value immediately as they occur and adjust the carrying value of the security to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security.
Net Income (Loss) Per Common Share
Net loss per common share is computed by dividing net loss by the weighted average number of common stock outstanding during the period. We apply the two-class method in calculating earnings per share. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standard Update (“ASU”) No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in 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 2020-06 also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it also simplifies the diluted earnings per share calculation in certain areas. ASU2020-06 is effective for fiscal years beginning after December 15, 2023, and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently assessing the impact, if any, that ASU2020-06 would have on its 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 updates, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
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
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.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting 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. Due solely to the material weaknesses in our internal control over financial reporting described below, our principal executive officer and principal financial and accounting officer have concluded that our disclosure controls and procedures were not effective as of September 30, 2021.
26
Notwithstanding the conclusion by our principal executive officer and principal financial officer that our disclosure controls and procedures as of September 30, 2021 were not effective, and notwithstanding the material weakness in our internal control over financial reporting described below, management believes that the unaudited condensed financial statements and related financial information included in this Quarterly Report fairly present in all material respects our financial condition, results of operations and cash flows as of the dates presented, and for the periods ended on such dates, in conformity with GAAP.
Material Weakness
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In connection with the management’s subsequent re-evaluation of its previously issued financial statements, the Company determined that there were errors in its accounting for complex financial instruments. Management concluded that a deficiency in internal control over financial reporting existed relating to the accounting treatment for temporary equity and that the failure to properly account for such equity and earnings per share constituted a material weakness. This material weakness resulted in the restatement of the Company’s financial statements as of and for the periods ended March 31, 2021 and June 30, 2021.
Changes in Internal Control Over Financial Reporting
Other than as described herein, there was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to continue to enhance our system of evaluating and implementing the accounting standards that apply to our financial statements, including through enhanced analyses by our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may be involved in various claims and legal actions in the ordinary course of business. We are not currently involved in any material legal proceedings outside the ordinary course of our business.
Item 1A. Risk Factors
Factors that could cause our actual results to differ materially from those in this report are any of the risks described in our final prospectus for our IPO filed with the SEC on March 3, 2021. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our final prospectus for our IPO filed with the SEC on March 3, 2021 and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, except for the below:
We have identified a material weakness in our internal control over financial reporting as of September 30, 2021. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
As described above, management identified a material weakness in our internal control over financial reporting related to the accounting treatment for temporary equity and earnings per share.
27
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Use of Proceeds
On March 4, 2021, we consummated our IPO of 42,000,000 Units. We also granted the underwriters a 45-day over-allotment option to purchase 6,300,000 additional Units at the initial public offering price. On April 14, 2021, we issued an additional 500,000 Units in connection with the underwriters’ partial exercise of their over-allotment option. Each Unit consists of one share of our Class A common stock and one-third of one warrant of the Company, with each whole warrant entitling the holder thereof to purchase one whole share of our Class A common stock at a price of $11.50 per share, subject to certain adjustments. The Units were sold at a price of $10.00 per unit, generating aggregate gross proceeds to the Company of $425,000,000. BofA Securities, Inc. and Barclays Capital Inc. acted as the joint book-running managers for our IPO. The securities sold in our IPO were registered under the Securities Act on registration statements on Form S-1 (File Nos. 333-252861 and 333-253755). The registration statements became effective on March 1, 2021.
Following the IPO, the partial exercise of the over-allotment option and the sale of the Private Placement Warrants, a total of $425,000,000 of the net proceeds from the sale of the Units and Private Placement Warrants was deposited in the Trust Account. Transaction costs of the IPO (including costs related to the closing of the underwriters’ over-allotment option) amounted to $24,006,835, consisting of $8,500,000 of underwriting discounts and commissions, $14,875,000 of deferred underwriting discounts and commissions and $631,835 of other offering costs. In addition, as of September 30, 2021, $1,032,015 of cash was held outside of the Trust Account and is available for working capital purposes.
For a description of the use of the net proceeds from our IPO, see Part I, Item 2 of this Quarterly Report.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
28
Item 6. Exhibits
Exhibit |
| Description |
3.1 | | |
| | |
3.2 | | |
| | |
31.1* | | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| | |
31.2* | | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| | |
32.1** | | |
| | |
32.2** | | |
| | |
101 | | The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Unaudited Condensed Balance Sheets; (ii) Unaudited Condensed Statements of Operations; (iii) Unaudited Condensed Statements of Changes in Stockholders’ Equity; (iv) Unaudited Condensed Statement of Cash Flows; and (v) Notes to Unaudited Condensed Financial Statements |
| | |
104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* | Filed herewith |
** | Furnished herewith |
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Anzu Special Acquisition Corp I | ||
| | ||
Date: | December 30, 2021 | By: | /s/ Dr. Whitney Haring-Smith |
| | Dr. Whitney Haring-Smith | |
| | Chief Executive Officer | |
| | (principal executive officer) | |
| | | |
Date: | December 30, 2021 | By: | /s/ John W. Joy |
| | John W. Joy | |
| | Chief Financial Officer | |
| | (principal financial and accounting officer) | |
30