Item 1. Financial Statements.
M3-Brigade Acquisition
II Corp.
CONDENSED BALANCE SHEETS
|
|
September 30,
2021
(unaudited)
(restated) |
|
|
December 31,
2020 |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
Cash |
|
$ |
1,124,039 |
|
|
$ |
— |
|
Prepaid
insurance |
|
|
729,762 |
|
|
|
— |
|
Total current assets |
|
|
1,853,801 |
|
|
|
— |
|
Investment
Held in Trust Account |
|
|
400,025,812 |
|
|
|
— |
|
Deferred
offering costs |
|
|
— |
|
|
|
25,000 |
|
Total
Assets |
|
$ |
401,879,613 |
|
|
$ |
25,000 |
|
LIABILITIES
AND STOCKHOLDERS’ (EQUITY) |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Accrued
offering costs and expenses |
|
$ |
4,174,090 |
|
|
$ |
— |
|
Due
to affiliates |
|
|
70,000 |
|
|
|
|
|
Taxes
payable |
|
|
2,250 |
|
|
|
|
|
Total
current liabilities |
|
|
4,246,340 |
|
|
|
— |
|
Warrant
liability |
|
|
32,054,172 |
|
|
|
— |
|
Deferred
underwriters discount |
|
|
14,000,000 |
|
|
|
|
|
Total
liabilities |
|
|
50,300,512 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (see Note 7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Common Stock subject to possible redemption, 40,000,000 and 0 shares at redemption value, respectively |
|
|
400,000,000 |
|
|
|
— |
|
Stockholders’
Equity (Deficit) |
|
|
|
|
|
|
|
|
Preference shares, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding |
|
|
— |
|
|
|
— |
|
Class B common shares. $0.0001 par value, 50,000,000 shares authorized; 10,000,000 and 11,500,000 issued and outstanding(1) |
|
|
1,000 |
|
|
|
1,150 |
|
Additional
paid in capital |
|
|
— |
|
|
|
23,850 |
|
Accumulated
deficit |
|
|
(48,421,899 |
) |
|
|
— |
|
Total
stockholders’ equity (deficit) |
|
|
(48,420,899 |
) |
|
|
25,000 |
|
Total
liabilities and stockholders’ equity (deficit) |
|
$ |
401,879,613 |
|
|
$ |
25,000 |
|
| (1) | This number includes an aggregate of up to 1,500,000 shares of our Class B common shares subject to forfeiture if the over-allotment option is not exercised in full or in part by the underwriters (see Note 6). Such shares were forfeited in the quarter ended June 30, 2021. |
See accompanying notes to unaudited condensed
financial statements.
M3-Brigade Acquisition
II Corp.
CONDENSED STATEMENTS OF OPERATIONS
| |
Nine months ended | | |
Three months ended | |
| |
September 30, 2021 | | |
September 30, 2021 | |
| |
(Unaudited) | | |
(Unaudited) | |
| |
(restated) | | |
(restated) | |
| |
| | |
| |
Formation and operating costs | |
$ | 961,385 | | |
$ | 734,511 | |
Terminated merger costs | |
| 4,000,000 | | |
| 2,500,000 | |
Loss from operations | |
| (4,961,385 | ) | |
| (3,234,511 | ) |
Other income/(expenses): | |
| | | |
| | |
Change in fair value of derivative liability | |
| 279,446 | | |
| (3,541,131 | ) |
Excess fair value of private placement warrants over consideration paid | |
| (529,653 | ) | |
| — | |
Transaction costs | |
| (1,265,712 | ) | |
| — | |
Change in fair value of overallotment option | |
| 1,406,950 | | |
| — | |
Investment income | |
| 25,812 | | |
| 5,147 | |
Total other income/(expense) | |
| (83,157 | ) | |
| (3,535,984 | ) |
Net loss | |
$ | (5,044,542 | ) | |
$ | (6,770,495 | ) |
| |
| | | |
| | |
Loss per share: | |
| | | |
| | |
Basic and diluted weighted average shares outstanding, Class A common stock subject to possible Redemption | |
| 30,183,150 | | |
| 40,000,000 | |
Basic and diluted net loss per share, Class A common stock subject to possible redemption | |
$ | (0.13 | ) | |
$ | (0.14 | ) |
Basic and diluted weighted average shares outstanding, non-redeemable common stock (1) | |
| 10,000,000 | | |
| 10,000,000 | |
Basic and diluted net loss per share, non-redeemable common stock | |
$ | (0.13 | ) | |
$ | (0.14 | ) |
| (1) | This number includes an aggregate of up to 1,500,000 shares of our Class B common shares subject to forfeiture if the over-allotment option is not exercised in full or in part by the underwriters (see Note 6). Such shares were forfeited in the quarter ended June 30, 2021. |
See accompanying notes to unaudited condensed
financial statements.
M3-Brigade Acquisition
II Corp.
CONDENSED STATEMENTS STOCKHOLDERS’ EQUITY (DEFICIT) AND TEMPORARY EQUITY
For the three and nine months ended September 30, 2021 (restated)
|
|
Class
A
Common Shares
Subject to Possible
Redemption |
|
|
Class
B
Common Shares |
|
|
Additional
Paid-in |
|
|
Accumulated |
|
|
Total
Stockholder’s
Equity |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
(Deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance—December
31, 2020 |
|
|
— |
|
|
$ |
— |
|
|
|
11,500,000 |
|
|
$ |
1,150 |
|
|
$ |
23,850 |
|
|
$ |
— |
|
|
$ |
25,000 |
|
Sale of 40,000,000 Units on March 8, 2021 |
|
|
40,000,000 |
|
|
|
400,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering
costs |
|
|
|
|
|
|
(21,440,443 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value
Public warrants at inception |
|
|
|
|
|
|
(20,553,964 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
Fair value
of overallotment option at inception |
|
|
|
|
|
|
(1,406,950 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss—three
months ended March 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(266,795 |
) |
|
|
(266,795 |
) |
Change
in Class A common stock subject to possible redemption |
|
|
|
|
|
|
43,401,357 |
|
|
|
|
|
|
|
|
|
|
|
(23,850 |
) |
|
|
(43,377,507 |
) |
|
|
(43,401,357 |
) |
Balance—March
31, 2021 (unaudited) (restated) |
|
|
40,000,000 |
|
|
$ |
400,000,000 |
|
|
|
11,500,000 |
|
|
$ |
1,150 |
|
|
$ |
— |
|
|
$ |
(43,644,302 |
) |
|
$ |
(43,643,152 |
) |
Forfeiture
of Class B shares |
|
|
|
|
|
|
|
|
|
|
(1,500,000 |
) |
|
|
(150 |
) |
|
|
|
|
|
|
150 |
|
|
$ |
— |
|
Net
income—three months ended June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,992,748 |
|
|
|
1,992,748 |
|
Balance—June
30, 2021 (unaudited) (restated) |
|
|
40,000,000 |
|
|
$ |
400,000,000 |
|
|
|
10,000,000 |
|
|
$ |
1,000 |
|
|
$ |
— |
|
|
$ |
(41,651,404 |
) |
|
$ |
(41,650,404 |
) |
Net loss—three
months ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,770,495 |
) |
|
|
(6,770,495 |
) |
Balance
September 30, 2021 (unaudited) |
|
|
40,000,000 |
|
|
$ |
400,000,000 |
|
|
|
10,000,000 |
|
|
$ |
1,000 |
|
|
$ |
— |
|
|
$ |
(48,421,899 |
) |
|
$ |
(48,420,899 |
) |
See accompanying notes to unaudited condensed
financial statements.
M3-Brigade Acquisition
II Corp.
CONDENSED STATEMENT OF CASH FLOWS
For the nine months ended September 30, 2021
(Unaudited) (Restated)
Cash Flows from Operating Activities: | |
| | |
Adjustment to reconcile net loss to net cash used in operating activities: | |
| | |
Net loss | |
$ | (5,044,542 | ) |
Interest earned on cash held in trust account | |
| (25,812 | ) |
Excess fair value of private placement warrants over consideration paid | |
| 529,653 | |
Change in fair value of overallotment option liability | |
| (1,406,950 | ) |
Change in fair value of warrants | |
| (279,446 | ) |
Transaction costs allocable to warrant liabilities | |
| 1,265,712 | |
Changes in operating assets and liabilities: | |
| | |
Prepaid insurance | |
| (729,762 | ) |
Accounts payable and accrued expenses | |
| 4,176,341 | |
Net cash used in operating activities | |
$ | (1,514,806 | ) |
Cash Flows from Investing Activities: | |
| | |
Investments and marketable
securities held in Trust Account | |
| (400,000,000 | ) |
Net cash used in investing activities | |
$ | (400,000,000 | ) |
Cash Flows from Financing Activities: | |
| | |
Proceeds from related party advances | |
| 198,629 | |
Repayment of related party advances | |
| (128,629 | ) |
Proceeds from sale of Units, net of offering costs | |
| 399,293,845 | |
Proceeds from sale of Founder Shares | |
| 25,000 | |
Proceeds from sales of Private Placement Warrants | |
| 11,250,000 | |
Payment of underwriters discount | |
| (8,000,000 | ) |
Net cash provided by financing
activities | |
$ | 402,638,845 | |
Net Change in Cash | |
| 1,124,039 | |
Cash, beginning of period | |
| — | |
Cash, end of period | |
$ | 1,124,039 | |
Supplemental Disclosure of Non-cash Financing Activities: | |
| | |
Deferred offering costs included in accrued offerings costs and expenses | |
$ | 14,000,000 | |
See accompanying notes to unaudited condensed
financial statements.
M3-BRIGADE ACQUISITION
II CORP.
NOTES TO UNAUDITED RESTATED CONDENSED FINANCIAL STATEMENTS
Note 1 — Organization and Business Operations
M3-Brigade Acquisition II Corp. (the “Company”) is a newly
organized blank check company incorporated as a Delaware corporation on December 16, 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 one or more businesses
(“Business Combination”). On August 16, 2021, the Company entered into an Agreement and Plan of Merger with Syniverse Corporation.
The Company has selected December 31 as its fiscal year end.
As of September 30, 2021, the Company had not commenced any operations.
All activity for the period from December 16, 2020 (inception) through September 30, 2021 relates to the Company’s formation and
the initial public offering (“IPO”), which is described below. The Company believes it will not generate any operating revenue
until after the completion of a 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 its warrants.
The Company’s sponsor is M3-Brigade Sponsor II LP, a Delaware
limited liability company (the “Sponsor”).
The registration statement for the Company’s IPO was declared
effective on March 3, 2021 (the “Effective Date”). On March 8, 2021, the Company consummated the IPO of 40,000,000 units (the
“Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”),
at $10.00 per Unit, generating gross proceeds of $400,000,000, which is discussed in Note 4 and Note 9.
The underwriters had a 45-day option from the effectiveness date of
the IPO (March 3, 2021) to purchase up to an additional 6,000,000 units to cover over-allotments, if any. On April 17, 2021 the underwriters’
over-allotment option expired unexercised (see Note 7).
Simultaneously with the closing of the IPO, the Company consummated
the sale of 7,500,000 Private Placement Warrants (the “Private Warrants”) to the Sponsor at a price of $1.50 per Private Warrant,
generating total gross proceeds of $11,250,000.
Transaction costs of the IPO amounted to $22,706,155 consisting of
$8,000,000 of underwriting discount, $14,000,000 of deferred underwriting discount, and $706,155 of other offering costs. Of the offering
costs, $1,265,712 is included in transaction costs on the Statement of Operations and $21,440,443 is included in equity.
Following the closing of the IPO on March 8,
2021, $400,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Private Warrants
was placed in a Trust Account and was invested in U.S. government securities, within the meaning set forth in Section 2 (a) (16) of
the Investment Company Act, with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a
money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act of 1940, as amended (the “Investment
Company Act”), as determined by the Company. Except with respect to interest earned on the funds held in the trust account
that may be released to the Company to pay its franchise and income tax obligations and up to $100,000 of interest to pay
dissolution expenses, the proceeds from the IPO and the sale of the Private Warrants will not be released from the trust account
until the earlier of (i) the completion of the Company’s initial business combination and (ii) the redemption of 100% of the
Company’s public shares if the Company is unable to complete the Company’s initial business combination within 24 months
from the closing of the IPO (March 8, 2023). The proceeds deposited in the trust account could become subject to the claims of our
creditors, if any, which could have priority over the claims of our public stockholders.
The Company’s management has broad discretion with respect to
the specific application of the net proceeds of the IPO, although substantially all of the net proceeds of 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” must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance
in the trust account (less any deferred underwriting commissions and taxes payable on interest earned) at the time of our signing a definitive
agreement in connection with the Company’s initial business combination. Furthermore, there is no assurance that the Company will
be able to successfully consummate a Business Combination.
The Company, after signing a definitive agreement for a Business Combination,
will either (i) seek stockholder approval of the Business Combination at a meeting called for such purpose in connection with which stockholders
may seek to redeem their shares, regardless of whether they vote for or against the Business Combination, for cash equal to their pro
rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial
Business Combination, including interest but less taxes payable, or (ii) provide stockholders with the opportunity to sell their shares
to the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount in cash equal to their pro
rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to commencement of the tender offer,
including interest but less taxes payable. The decision as to whether the Company will seek stockholder approval of the Business Combination
or will allow stockholders to sell their shares in a tender offer will be made by the Company, solely in its 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 stock exchange rules. If the Company seeks stockholder approval, it will complete
its Business Combination only if a majority of the outstanding shares of common stock voted are voted in favor of the 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 $5,000,001.
In such case, the Company would not proceed with the redemption of its public shares and the related Business Combination, and instead
may search for an alternate Business Combination.
If the Company holds a stockholder vote or there is a tender offer
for shares in connection with a Business Combination, a public stockholder will have the right to redeem its shares for an amount in cash
equal to its pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation
of the initial Business Combination, including interest but less taxes payable. As a result, such shares of common stock will be recorded
at redemption amount and classified as temporary equity upon the completion of the IPO, in accordance with FASB ASC 480, “Distinguishing
Liabilities from Equity.”
The Company will only have 24 months from the closing date of the IPO
(March 8, 2023) to complete its initial Business Combination. If the Company does not complete a Business Combination within this period
of time, it shall (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 of common stock for a per share pro rata portion of the Trust Account, including
interest, but less taxes payable (less 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 the Company’s net assets to its remaining stockholders, as part
of its plan of dissolution and liquidation.
The initial stockholders have entered into letter agreements with the
Company, pursuant to which they have waived their rights to participate in any redemption with respect to their initial shares; however,
if the initial stockholders or any of the Company’s officers, directors or affiliates acquire shares of Class A common stock in
or after the IPO, they will be entitled to a pro rata share of the Trust Account with respect to such acquired shares of Class A common
stock upon the Company’s redemption or liquidation in the event the Company does not complete a Business Combination within the
required time period.
In the event of such redemption, 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 IPO.
The Company’s Sponsor has agreed that it will be liable to the
Company if and to the extent any claims by a vendor 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 (i)
$10.00 per public share or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the
trust account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes
and working capital, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the trust
account and except as to any claims under our indemnity of the underwriters of the IPO against certain liabilities, including liabilities
under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Company’s
Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company has not independently verified
whether the Company’s Sponsor has sufficient funds to satisfy its indemnity obligations and the Company’s Sponsor may not
be able to satisfy those obligations. The Company has not asked the Company’s Sponsor to reserve for such eventuality. The Company
believes the likelihood of the Company’s Sponsor having to indemnify the trust account is limited because the Company will endeavor
to have all vendors and prospective target businesses as well as other entities execute agreements with the Company waiving any right,
title, interest or claim of any kind in or to monies held in the trust account.
Proposed Business Combination and Related Agreements
On August 16, 2021, the Company entered into an Agreement and Plan
of Merger (the “Merger Agreement”) with Syniverse Corporation, a Delaware corporation (“Syniverse”), and Blue
Steel Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”), pursuant to which
Merger Sub will merge with and into Syniverse, with Syniverse surviving the merger as a wholly owned subsidiary of the Company (the “Merger”).
Subject to the terms of the Merger Agreement, the aggregate purchase
price to be paid by the Company to Syniverse’s stockholders at the closing of the Merger (the “Closing”) is expected
to be approximately $704,440,000, subject to adjustments for, among other things, the Twilio Investment (defined below) and Leakage (as
defined in the Merger Agreement) that has occurred from November 30, 2020 through immediately prior to the effective time of the Merger,
and will be paid entirely in shares of the Company’s Class A common stock, at a value of $10.00 per share (the “Aggregate
Merger Consideration”). For purposes of the following paragraph, the “Exchange Ratio” means the Aggregate Merger Consideration
divided by the aggregate fully diluted number of shares of common stock of Syniverse (the “Syniverse Shares”).
At the effective time of the Merger, each Syniverse Share that is issued
and outstanding immediately prior to the effective time of the Merger will be cancelled and converted into the right to receive a portion
of the Aggregate Merger Consideration equal to (a) the Exchange Ratio multiplied by (b) the number of Syniverse Shares held by the applicable
holder as of immediately prior to the effective time of the Merger, rounded to the nearest whole share. At the effective time of the Merger,
all share incentive plan or similar equity-based compensation plans maintained for employees of Syniverse, all outstanding options to
purchase Syniverse Shares and each restricted stock unit award with respect to Syniverse Shares will be assumed by the Company, in each
case on the terms and subject to the conditions in the Merger Agreement.
Private Placement
Concurrently with the execution of the Merger Agreement, the Company
entered into (a) a subscription agreement with the Sponsor pursuant to which the Sponsor has agreed to purchase an aggregate of 1,500,000
shares of Class A common stock, at a purchase price of $10.00 per share, for an aggregate purchase price of $15,000,000 and (b) subscription
agreements with certain other investors (the “PIPE Investors”), pursuant to which the PIPE Investors have agreed to purchase
shares of Class A common stock, at a purchase price of $10.00 per share, and shares of newly issued Series A Convertible Preferred Stock,
par value $0.0001 per share, of the Company (the “Convertible Preferred Stock”), at a purchase price of $970.00 per share,
for an aggregate purchase price of $250,000,000 (the transactions in clauses (a) and (b) together, the “Private Placement”).
The proceeds from the Private Placement will be used to refinance the outstanding indebtedness and other obligations of Syniverse and
its subsidiaries at the Closing.
Twilio Investment
Concurrently with the execution of the Merger Agreement, the Company
entered into a subscription agreement with Twilio Inc., a Delaware corporation (“Twilio”), pursuant to which Twilio has agreed
to purchase Class A common stock and, if applicable, shares of newly issued Class C common stock, par value $0.0001 per share, of the
Company, at the Closing for an aggregate purchase price of up to $750,000,000, with the size of Twilio’s investment and the number
of shares issued to Twilio determined based on the terms of its pre-existing framework agreement with Syniverse, dated as of February
26, 2021, as amended on August 16, 2021 (the “Framework Agreement” and, such investment, the “Twilio Investment”).
Under the Framework Agreement, the size of the Twilio Investment will be reduced below $750,000,000 only to the extent the total transaction
proceeds from the Company’s trust account (net of redemptions) and the Private Placement exceed $375,000,000, with such reduction
equal to the amount of such excess, subject to a minimum investment by Twilio of $500,000,000.
Stockholders Agreement
The Merger Agreement contemplates that, at the Closing, the Company,
Carlyle Partners V Holdings, L.P., a Delaware limited partnership and Syniverse’s majority stockholder (“Carlyle”),
Twilio and the Sponsor will enter into a stockholders agreement (the “Stockholders Agreement”), pursuant to which, among other
things, (a) Carlyle will be entitled to appoint directors (initially five, but subject to downward adjustment depending on its continuing
percentage ownership relative to its initial ownership) to the Company’s board of directors so long as Carlyle holds at least 5%
of the outstanding common stock; (b) Twilio will be entitled to appoint directors (initially four, but subject to downward adjustment
depending on its continuing percentage ownership relative to its initial ownership) to the Company’s board of directors so long
as Twilio holds at least 5% of the outstanding common stock; and (c) the Sponsor will be entitled to appoint two directors to the Company’s
board of directors so long as the Sponsor continues to hold 50% of the shares of Class A common stock it held at the Closing (and one
director so long as it holds 33.33% of such shares). The Stockholders Agreement contains certain restrictions on transfer with respect
to shares of common stock held by Carlyle, Twilio and the Sponsor immediately following the Closing (the “Locked-Up Shares”).
Such restrictions include, among others, a prohibition on transfers of Locked-Up Shares, subject to limited exceptions, until the earlier
to occur of (a) the 12-month anniversary of the Closing and (b) the date on which the per share closing price for the Class A common stock
has been equal to or greater than $12.50 per share for any 20 trading days within any consecutive 30-trading day period following the
Closing.
In addition, the Stockholders Agreement will provide (a) consent rights
to Carlyle and Twilio in respect of certain significant transactions by the Company following the Closing, subject to specified ownership
thresholds, and (b) a right of first offer to Twilio, subject to certain exceptions, with respect to any privately negotiated sale by
Carlyle (or its affiliates) of more than 10% of the Company’s outstanding shares, for so long as Twilio’s percentage ownership
(together with its affiliates) exceeds 15%.
Sponsor Agreement
Concurrently with the execution of the Merger
Agreement, the Company, the Sponsor, an individual (together with the Sponsor, the “Sponsor Parties”) and Syniverse
entered into a sponsor support agreement (the “Sponsor Agreement”), pursuant to which, among other things, in accordance
with the terms and subject to the conditions set forth therein, the Sponsor Parties have agreed to vote their shares of Class B
common stock and any shares of common stock the Sponsor Parties subsequently acquire to approve the transactions contemplated by the
Merger Agreement and against any inconsistent proposals during the term of the Sponsor Agreement and to not redeem such shares.
The Sponsor Agreement also provides that 70% of such shares of Class
B common stock will vest and be available to the Sponsor Parties at the Closing, and the remaining 30% of such shares will vest on the
first trading day that the closing price of Class A common stock equals or exceeds $12.50 per share for any 20 trading days within any
consecutive 30-trading day period following the Closing, subject to earlier vesting in certain circumstances as described therein.
Registration Rights Agreement
At the Closing, the Company, the Sponsor, Carlyle, Twilio and the PIPE
Investors will enter into a registration rights agreement, pursuant to which the Company will agree to register for resale, pursuant to
Rule 415 under the Securities Act, certain shares of Class A common stock, including Class A common stock underlying the Convertible Preferred
Stock, and other equity securities of the Company that are held by the foregoing parties from time to time.
On February 9, 2022, the proposed transaction with Syniverse Corporation
was terminated.
Risks and Uncertainties
On January 30, 2020, the World Health
Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19
outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure
globally. The full impact of the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak on the Company’s
financial position will depend on future developments, including the duration and spread of the outbreak and related advisories and
restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy are highly
uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the
Company’s financial position may be materially adversely affected. Additionally, the Company’s ability to complete an
initial Business Combination may be materially adversely affected due to significant governmental measures being implemented to
contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among
others, which may limit the Company’s ability to have meetings with potential investors or affect the ability of a potential
target company’s personnel, vendors and service providers to negotiate and consummate an initial Business Combination in a
timely manner. The Company’s ability to consummate an initial Business Combination may also be dependent on the ability to
raise additional equity and debt financing, which may be impacted by the COVID-19 outbreak and the resulting market downturn. The
financial statement does not include any adjustments that might result from the outcome of this uncertainty.
Liquidity and Capital Resources
As of September 30, 2021, the Company had approximately $1.1 million
in its operating bank account, and working capital deficit of approximately $2.4 million, excluding the deferred underwriting commission
and warrant liability.
The Company’s liquidity needs prior to the IPO had been satisfied
through a payment from the Sponsor of $25,000 for the Founder Shares (see Note 6). Additionally, related parties paid $198,629 in offering
costs and taxes. As of September 30, 2021, the Company owed $70,000 to the related parties on account of unreimbursed expenses incurred
in connection with the sourcing of its initial business combination and the transactions contemplated by the Merger Agreement. Management
believes that the cash in the operating bank account will be sufficient to fund operating expenses prior to the Business Combination.
In order to finance transaction costs in connection with a Business
Combination, the Company’s Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may,
but are not obligated to, provide Working Capital Loans to the Company (see Note 6). As of September 30, 2021, there were no amounts outstanding
under any 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, the Company will be using these funds for paying existing accounts
payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target
businesses, travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating
the Business Combination. However, if our estimate 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, in addition to the access to the Working
Capital Loans, we may need to obtain other financing either to complete our business combination or because we become obligated to redeem
a significant number of our public shares upon consummation of our business combination, in which case we may issue additional securities
or incur debt in connection with such business combination. Subject to compliance with applicable securities laws, we would only complete
such financing simultaneously with the completion of our business combination. If we are unable to complete our business combination because
we do not have sufficient funds available to us, we may will be forced to cease operations and liquidate the Trust Account. In addition,
following our business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
Note 2 — Restatement of Previously Issued
Financial Statements
In reviewing its financial statements for prior reporting
periods, management of the Company has determined that the following modification is appropriate to reflect a non-cash liability which
has since been eliminated:
| ● | In
connection with the initial public offering (the “IPO”) of the Company, the underwriter was granted a customary overallotment
option which permitted it to purchase up to an additional 15% of the Units sold in IPO within 45-days following the closing of the IPO.
At the time of the IPO and in its financial statements for reporting periods thereafter which include that 45-day period, the Company
failed to record a liability for the value of the overallotment option, as contemplated by FASB ASC 480, “Distinguishing Liabilities
from Equity” (and to reverse that liability into a component of other income when the overallotment option expired without being
exercised on April 19, 2021). |
| ● | Adjustments
to the classification of certain costs associated with the sale of Units |
| ● | Recognition
of a Merger related expense, which commenced in the second quarter of 2021. Note that the vendor forgave the balance due upon announcement
of the termination of the merger in February 2021. |
On April 14, 2022, the audit committee of the
board of directors of the Company (the “Audit Committee”) determined, after considering information provided by the
Company’s management, that the value of the overallotment option described above should have been recorded as a liability at
the time of the IPO and then reversed upon expiry of such option. Similarly, the Audit Committee determined that the Merger-related expenses should have been recorded as a liability and that adjustments should be made to properly classify the relevant
costs associated with the sale of the Units. As a result of these omissions and adjustments, the Audit Committee also determined
that the Company’s unaudited financial statements as of June 30, 2021 as reported in the Company’s Form 10-Q filed on
August 23, 2021 should be restated.
The following tables summarize the effect if the financial statements
had been restated on each financial statement line item as of the date indicated:
|
|
As |
|
|
|
|
|
|
|
|
|
Previously |
|
|
|
|
|
|
|
|
|
Reported |
|
|
Adjustment |
|
|
As restated |
|
Balance Sheet at September 30, 2021 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses |
|
$ |
174,090 |
|
|
$ |
4,000,000 |
|
|
$ |
4,174,090 |
|
Current liabilities |
|
|
246,340 |
|
|
|
4,000,000 |
|
|
|
4,246,340 |
|
Total liabilities |
|
|
46,300,512 |
|
|
|
4,000,000 |
|
|
|
50,300,512 |
|
Accumulated deficit |
|
|
(44,421,899 |
) |
|
|
(4,000,000 |
) |
|
|
(48,421,899 |
) |
Total Stockholders’ Equity (Deficit) |
|
|
(44,420,899 |
) |
|
|
(4,000,000 |
) |
|
|
(48,420,899 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations – three months ended September 30, 2021 (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
Terminated merger related cost |
|
$ |
0 |
|
|
$ |
2,500,000 |
|
|
$ |
2,500,000 |
|
Loss from operations |
|
|
(734,511 |
) |
|
|
(2,500,000 |
) |
|
|
(3,234,511 |
) |
Net loss |
|
|
(4,270,495 |
) |
|
|
(2,500,000 |
) |
|
|
(6,770,495 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share – three months ended
September 30, 2021 (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share – Class A common stock |
|
$ |
(0.09 |
) |
|
|
|
|
|
$ |
(0.14 |
) |
Basic and diluted loss per share – Class B common stock |
|
$ |
(0.09 |
) |
|
|
|
|
|
$ |
(0.14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations - nine months ended
September 30, 2021 (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
Formation and operating costs |
|
$ |
976,836 |
|
|
$ |
(15,451 |
) |
|
$ |
961,385 |
|
Terminated merger related costs |
|
|
- |
|
|
|
4,000,000 |
|
|
|
4,000,000 |
|
Loss from operations |
|
|
(976,836 |
) |
|
|
(3,984,549 |
) |
|
|
(4,961,385 |
) |
Transaction cost |
|
|
1,182,124 |
|
|
|
83,588 |
|
|
|
1,265,712 |
|
Change in fair value of overallotment option |
|
|
- |
|
|
|
(1,406,950 |
) |
|
|
(1,406,950 |
) |
Total other (income) expense |
|
|
1,406,519 |
|
|
|
(1,323,362 |
) |
|
|
83,157 |
|
Net loss |
|
|
(2,383,355 |
) |
|
|
(2,661,187 |
) |
|
|
(5,044,542 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share – nine months ended
September 30, 2021 (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share – Class A common stock |
|
$ |
(0.06) |
|
|
|
|
|
|
$ |
(0.13) |
|
Basic and diluted earnings per share – Class B common stock |
|
$ |
(0.06) |
|
|
|
|
|
|
$ |
(0.13) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Cash Flows - nine months ended
September 30, 2021 (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(2,382,355) |
|
|
$ |
(2,661,187 |
) |
|
$ |
(5,044,542 |
) |
Transaction costs |
|
|
1,182,124 |
|
|
|
83,588 |
|
|
|
1,265,712 |
|
Change in fair value of overallotment option |
|
|
- |
|
|
|
(1,406,950 |
) |
|
|
(1,406,950 |
) |
Change in accounts payable |
|
|
176,341 |
|
|
|
4,000,000 |
|
|
|
4,176,341 |
|
Net cash used in operating activities |
|
|
(1,530,257 |
) |
|
|
15,451 |
|
|
|
(1,514,806 |
) |
Proceeds from sale of Units |
|
|
399,309,296 |
|
|
|
(15,451 |
) |
|
|
399,293,845 |
|
Net cash provided by Financing activities |
|
|
402,654,296 |
|
|
|
(15,451 |
) |
|
|
402,638,845 |
|
Note 3 — Summary of 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 10 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 Prospectus for its IPO as filed with the SEC on March 5, 2021. 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
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 may 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 neither an emerging growth company nor an emerging growth company
which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting
standards used.
Use of Estimates
The preparation of unaudited condensed financial statements in conformity
with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the unaudited condensed financial statements. 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 statements, 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.
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 $1.1 million in cash as of September 30,
2021 and none at December 31, 2020. The Company had no cash equivalents (other than assets held in the Trust Account) at September 30,
2021 or December 31, 2020.
Investments Held in Trust Account
At September 30, 2021, the assets held in the Trust Account were substantially
held in mutual funds that invest primarily in U.S. government securities.
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
As discussed in Note 4, all of the 40,000,000 Class A Common Stock
sold as part of the Units in the Public Offering contain a redemption feature which allows for the redemption of such public shares in
connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Business Combination
and in connection with certain amendments to the Company’s second amended and restated certificate of incorporation. In accordance
with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions
not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity.
Therefore, all Class A Common Stock has been classified outside of permanent equity.
The Company recognizes changes in redemption value immediately as they
occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases
or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated
deficit.
Net Income (Loss) Per Common Stock
Net income (loss) per common stock is computed by dividing net income
(loss) by the weighted average number of shares of common stock outstanding for each of the periods. The calculation of diluted income
(loss) per common stock does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering or (ii)
Private Placement Warrants because the exercise of the warrants is contingent upon the occurrence of future events and the inclusion of
such warrants would be anti-dilutive. The warrants are exercisable to purchase 20,833,333 shares of Class A common stock in the aggregate.
The Company’s statements of operations include a presentation
of income (loss) per share for Class A Common Stock subject to possible redemption in a manner similar to the two-class method of income
(loss) per common stock. As of September 30, 2021, the Company did not have any dilutive securities and other contracts that could, potentially,
be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted loss per share is the
same as basic loss per share for the period presented.
The underwriters had a 45-day option from the effectiveness date of
the IPO (March 3, 2021) to purchase up to an additional 6,000,000 units to cover over-allotments, if any. That option expired without
being exercised on April 17, 2021.
Below is a reconciliation of the net loss per
common stock (restated):
|
|
Three months ended
September 30,
2021 |
|
|
Nine months ended September 30,
2021 |
|
Numerator: total net loss |
|
$ |
(6,770,495 |
) |
|
$ |
(5,044,542 |
) |
|
|
|
|
|
|
|
|
|
Redeemable Class A common stock |
|
|
|
|
|
|
|
|
Net loss allocated to Class A common stock |
|
|
(5,416,396 |
) |
|
|
(3,789,155 |
) |
Weighted Average Redeemable Class A common stock – basic and diluted |
|
|
40,000,000 |
|
|
|
30,183,150 |
|
Basic and diluted net loss per share – Class A common stock |
|
$ |
(0.14 |
) |
|
$ |
(0.13 |
) |
|
|
|
|
|
|
|
|
|
Class B common stock |
|
|
|
|
|
|
|
|
Net loss allocated to Class B common stock |
|
|
(1,354,099 |
) |
|
|
(1,255,387 |
) |
Weighted Average Class B common stock – basic and diluted |
|
|
10,000,000 |
|
|
|
10,000,000 |
|
Basic and diluted net loss per share – Class B common stock |
|
$ |
(0.14 |
) |
|
$ |
(0.13 |
) |
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 stockholders’ equity or the Statement of Operations based on the residual method of the Public and Private Warrants
to the proceeds received from the Units sold upon the completion of the IPO. Accordingly, as of March 31, 2021, offering $22,706,155 (consisting
of $8,000,000 of underwriting discount, $14,000,000 of deferred underwriting discount, and $706,155 of other offering costs) were recognized
with $1,265,712 which was allocated to the Public Warrants and Private Warrants, included in the Statement of Operations as a component
of Loss from Operations and $21,440,443 included in stockholders’ equity.
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. The fair value of the warrant
liabilities are discussed below.
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 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. The Company has 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. The Company applies 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 to the Class A
common stock.
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 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. |
Income Taxes
The Company accounts for
income taxes under ASC 740 “Income Taxes” (“ASC 740”). ASC 740 clarifies the accounting for uncertainty in income
taxes recognized in an enterprise’s financial statement 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 no unrecognized tax benefits and
no amounts accrued for interest and penalties as of September 30, 2021. The Company is currently not aware of any issues under review
that could result in significant payments, accruals or material deviation from its position.
The Company 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.
Recently Adopted Accounting
Standards
In August
2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 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)” (“ASU 2020- 06”) to simplify accounting for certain financial instruments. ASU 2020-06
eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments
and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity.
The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled
in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if
converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified
retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company adopted ASU 2020-06 effective January 1,2021.
The adoption of ASU 2020- 06 did not have an impact on the Company’s financial statements.
Recent Accounting Standards
Management does not believe
that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s
financial statements.
Note 4 — Initial Public
Offering
On March 8, 2021, the
Company consummated the IPO of 40,000,000 units (the “Units”), at a purchase price of $10.00 per Unit. Each Unit consists
of one share of Class A common stock, and one-third warrant to purchase one share of Class A common stock. Each warrant will entitle
the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment. Each warrant will become
exercisable on the later of 30 days after the completion of the initial business combination or 12 months from the closing of the IPO
and will expire five years after the completion of the initial business combination, or earlier upon redemption or liquidation. (see
Note 4).
The underwriters were
granted a 45-day option from the effective date of the IPO (March 3, 2021) to purchase up to an additional 6,000,000 units to cover over-allotments.
The option expired unexercised.
Warrants
Each whole warrant entitles
the registered holder to purchase one whole share of the Company’s Class A common stock at a price of $11.50 per share, subject
to adjustment as discussed below, at any time commencing on the later of 12 months from the IPO or 30 days after the completion of the
Company’s initial business combination.
Pursuant to the warrant
agreement, a warrantholder may exercise its warrants only for a whole number of shares of Class A common stock. This means that only
a whole warrant may be exercised at any given time by a warrantholder. No fractional warrants will be issued upon separation of the units
and only whole warrants will trade. Accordingly, unless you purchase at least three units, you will not be able to receive or trade a
whole warrant. The warrants will expire five years after the completion of the Company’s initial business combination, at 5:00
p.m., New York City time, or earlier upon redemption or liquidation.
The Company will not be
obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such
warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying
the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying the Company’s obligations
described below with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of
Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered,
qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the
event that the conditions in the two immediately preceding sentences are not satisfied with respect to a warrant, the holder of such
warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In no event will the Company
be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the
purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of Class A common
stock underlying such unit.
The Company has agreed
that as soon as practicable, but in no event later than thirty (30) days, after the closing of the Company’s initial business combination,
the Company will use commercially reasonable efforts to file with the SEC a registration statement for the registration, under the Securities
Act, of the shares of Class A common stock issuable upon exercise of the warrants. The Company will use commercially reasonable efforts
to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating
thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. If a registration statement
covering the shares of Class A common stock issuable upon exercise of the warrants is not effective within 90 days after the closing
of the Company’s initial business combination, warrant holders may, under the circumstances specified in the warrant agreement
and until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain
an effective registration statement, exercise warrants on a cashless basis.
Once the warrants become exercisable,
the Company may call the warrants for redemption:
| ● | in whole and not
in part; |
| ● | at a price of $0.01 per warrant; |
| ● | upon not less than
30 days’ prior written notice of redemption (the “30-day redemption period”)
to each warrant holder; and |
| ● | if, and only if, the reported last sale price of the Class A common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date the Company sends to the notice of redemption to the warrant holders. |
If and when the warrants
become redeemable by the Company, the Company may exercise the Company’s redemption right even if the Company is unable to register
or qualify the underlying securities for sale under all applicable state securities laws.
The Company has established
the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the call a significant
premium to the warrant exercise price. If the foregoing conditions are satisfied and the Company issues a notice of redemption of the
warrants, each warrant holder will be entitled to exercise his, her or its warrant prior to the scheduled redemption date. However, the
price of the Class A common stock may fall below the $18.00 redemption trigger price as well as the $11.50 warrant exercise price (for
whole shares) after the redemption notice is issued without affecting the right of the Company to consummate such redemption.
If the Company calls the
warrants for redemption as described above, the Company’s management will have the option to require any holder that wishes to
exercise his, her or its warrant to do so on a “cashless basis.” In determining whether to require all holders to exercise
their warrants on a “cashless basis,” the Company’s management will consider, among other factors, the Company’s
cash position, the number of warrants that are outstanding and the dilutive effect on the Company’s stockholders of issuing the
maximum number of shares of Class A common stock issuable upon the exercise of the Company’s warrants. If the Company’s management
takes advantage of this option, all holders of warrants would pay the exercise price by surrendering their warrants for that number of
shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock
underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value”
(defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of
the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption
is sent to the holders of warrants. If the Company’s management takes advantage of this option, the notice of redemption will contain
the information necessary to calculate the number of shares of Class A common stock to be received upon exercise of the warrants, including
the “fair market value” in such case. Requiring a cashless exercise in this manner will reduce the number of shares to be
issued and thereby lessen the dilutive effect of a warrant redemption. We believe this feature is an attractive option to the Company
if the Company does not need the cash from the exercise of the warrants after the Company’s initial business combination. If the
Company calls the Company’s warrants for redemption and the Company’s management does not take advantage of this option,
the Company’s sponsor and its permitted transferees would still be entitled to exercise their private placement warrants contained
in the private placement warrants for cash or on a cashless basis using the same formula described above that other warrant holders would
have been required to use had all warrant holders been required to exercise their warrants on a cashless basis, as described in more
detail below.
A holder of a warrant
may notify the Company in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise
such warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to
the warrant agent’s actual knowledge, would beneficially own in excess of 9.8% (or such other amount as a holder may specify) of
the shares of Class A common stock outstanding immediately after giving effect to such exercise.
If the number of outstanding
shares of Class A common stock is increased by a stock dividend payable in shares of Class A common stock, or by a split- up of shares
of Class A common stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number
of shares of Class A common stock issuable on exercise of each warrant will be increased in proportion to such increase in the outstanding
shares of Class A common stock. A rights offering to holders of Class A common stock entitling holders to purchase shares of Class A
common stock at a price less than the fair market value will be deemed a stock dividend of a number of shares of Class A common stock
equal to the product of (i) the number of shares of Class A common stock actually sold in such rights offering (or issuable under any
other equity securities sold in such rights offering that are convertible into or exercisable for Class A common stock) multiplied by
(ii) one (1) minus the quotient of (x) the price per share of Class A common stock paid in such rights offering divided by (y) the fair
market value. For these purposes (i) if the rights offering is for securities convertible into or exercisable for Class A common stock,
in determining the price payable for Class A common stock, there will be taken into account any consideration received for such rights,
as well as any additional amount payable upon exercise or conversion and (ii) fair market value means the volume weighted average price
of Class A common stock as reported during the ten (10) trading day period ending on the trading day prior to the first date on which
the shares of Class A common stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive
such rights.
In addition, if the Company,
at any time while the warrants are outstanding and unexpired, pays a dividend or makes a distribution in cash, securities or other assets
to the holders of Class A common stock on account of such shares of Class A common stock (or other shares of the Company’s capital
stock into which the warrants are convertible), other than (a) as described above, (b) certain ordinary cash dividends of which are dividends
up to $0.50 per share per year, (c) to satisfy the redemption rights of the holders of Class A common stock in connection with a proposed
initial business combination, (d) as a result of the repurchase of shares of Class A common stock by the company if the proposed initial
business combination is presented to the stockholders of the Company for approval, or (e) in connection with the redemption of the Company’s
public shares upon the Company’s failure to complete the Company’s initial business combination, then the warrant exercise
price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value
of any securities or other assets paid on each share of Class A common stock in respect of such event. No other adjustments will be required
to be made including for issuing Class A common stock at below market price and/or exercise price.
If the number of outstanding
shares of the Company’s Class A common stock is decreased by a consolidation, combination, reverse stock split or reclassification
of shares of Class A common stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock
split, reclassification or similar event, the number of shares of Class A common stock issuable on exercise of each warrant will be decreased
in proportion to such decrease in outstanding shares of Class A common stock.
Whenever the number of
shares of Class A common stock purchasable upon the exercise of the warrants is adjusted, as described above, the warrant exercise price
will be adjusted by multiplying the warrant exercise price immediately prior to such adjustment by a fraction (x) the numerator of which
will be the number of shares of Class A common stock purchasable upon the exercise of the warrants immediately prior to such adjustment,
and (y) the denominator of which will be the number of shares of Class A common stock so purchasable immediately thereafter.
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 $9.20 per ordinary
share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in
the case of any such issuance to the Company’s sponsor or its affiliates, without taking into account any founder shares held by
the Company’s sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the
aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for
the funding of the Company’s initial business combination on the date of the consummation of the Company’s initial business
combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s Class A common stock during
the 20 trading day period starting on the trading day prior to the day on which the Company consummates the Company’s initial business
combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted
(to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption
trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly
Issued Price.
In case of any reclassification
or reorganization of the outstanding shares of Class A common stock (other than those described above or any that solely affects the
par value of such shares of Class A common stock), or in the case of any merger or consolidation of the Company with or into another
corporation (other than a consolidation or merger in which the Company is are the continuing corporation and that does not result in
any reclassification or reorganization of the Company’s outstanding shares of Class A common stock), or in the case of any sale
or conveyance to another corporation or entity of the assets or other property of the Company as an entirety or substantially as an entirety
in connection with which the Company is dissolved, the holders of the warrants will thereafter have the right to purchase and receive,
upon the basis and upon the terms and conditions specified in the warrants and in lieu of the shares of the Company’s Class A common
stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of
shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation,
or upon a dissolution following any such sale or transfer, that the holder of the warrants would have received if such holder had exercised
their warrants immediately prior to such event. However, if such holders were entitled to exercise a right of election as to the kind
or amount of securities, cash or other assets receivable upon such consolidation or merger, then the kind and amount of securities, cash
or other assets for which each warrant will become exercisable will be deemed to be the weighted average of the kind and amount received
per share by such holders in such consolidation or merger that affirmatively make such election, and if a tender, exchange or redemption
offer has been made to and accepted by such holders (other than a tender, exchange or redemption offer made by the company in connection
with redemption rights held by stockholders of the company as provided for in the company’s amended and restated certificate of
incorporation or as a result of the repurchase of shares of Class A common stock by the company if a proposed initial business combination
is presented to the stockholders of the company for approval) under circumstances in which, upon completion of such tender or exchange
offer, the maker thereof, together with members of any group (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) of which
such maker is a part, and together with any affiliate or associate of such maker (within the meaning of Rule 12b-2 under the Exchange
Act) and any members of any such group of which any such affiliate or associate is a part, own beneficially (within the meaning of Rule
13d-3 under the Exchange Act) more than 50% of the outstanding shares of Class A common stock, the holder of a warrant will be entitled
to receive the highest amount of cash, securities or other property to which such holder would actually have been entitled as a stockholder
if such warrant holder had exercised the warrant prior to the expiration of such tender or exchange offer, accepted such offer and all
of the Class A common stock held by such holder had been purchased pursuant to such tender or exchange offer, subject to adjustments
(from and after the consummation of such tender or exchange offer) as nearly equivalent as possible to the adjustments provided for in
the warrant agreement. Additionally, if less than 70% of the consideration receivable by the holders of Class A common stock in such
a transaction is payable in the form of Class A common stock in the successor entity that is listed for trading on a national securities
exchange or is quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately following such
event, and if the registered holder of the warrant properly exercises the warrant within thirty days following public disclosure of such
transaction, the warrant exercise price will be reduced as specified in the warrant agreement based on the per share consideration minus
Black-Scholes Warrant Value (as defined in the warrant agreement) of the warrant.
The warrants will be issued
in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and the Company.
The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity
or correct any mistake, including to conform the provisions of the warrant agreement to the description of the terms of the warrants
and the warrant agreement set forth in this prospectus, or to correct any defective provision, but requires the approval by the holders
of at least 50% of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders
of public warrants. A change affecting the terms of the private placement warrants will require the approval of holders of at least 50%
of the private placement warrants.
The warrants may be exercised
upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form
on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price
(or on a cashless basis, if applicable), by certified or official bank check payable to the Company, for the number of warrants being
exercised. The warrant holders do not have the rights or privileges of holders of Class A common stock and any voting rights until they
exercise their warrants and receive shares of Class A common stock. After the issuance of shares of Class A common stock upon exercise
of the warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.
Warrants may be exercised
only for a whole number of shares of Class A common stock. No fractional shares will be issued upon exercise of the warrants. If, upon
exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, the Company will, upon exercise, round
down to the nearest whole number the number of shares of Class A common stock to be issued to the warrant holder. As a result, warrant
holders not purchasing an even number of warrants must sell any odd number of warrants in order to obtain full value from the fractional
interest that will not be issued.
The private placement warrants
(including the Class A common stock issuable upon exercise of the private placement warrants) will not be transferable, assignable or
salable until 30 days after the completion of the Company’s initial business combination (except, among other limited exceptions
as described under “Principal Stockholders— Transfers of Founder Shares and Private Placement Warrants,” to the Company’s
officers and directors and other persons or entities affiliated with the sponsor) and they will not be redeemable by the Company so long
as they are held by the sponsor or its permitted transferees. Otherwise, the private placement warrants have terms and provisions that
are identical to those of the warrants being sold as part of the units in the IPO. If the private placement warrants are held by holders
other than the sponsor or its permitted transferees, the private placement warrants will be redeemable by the Company and exercisable
by the holders on the same basis as the warrants included in the units being sold in the IPO.
If holders of the private
placement warrants elect to exercise them on a cashless basis, they would pay the exercise price by surrendering his, her or its warrants
for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares
of Class A common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair
market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported
last sale price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice
of warrant exercise is sent to the warrant agent. The reason that the Company has agreed that these warrants will be exercisable on a
cashless basis so long as they are held by the Company’s sponsor and permitted transferees is because it is not known at this time
whether they will be affiliated with the Company following a business combination. If they remain affiliated with the Company, their
ability to sell the Company’s securities in the open market will be significantly limited. We expect to have policies in place
that prohibit insiders from selling the Company’s securities except during specific periods of time. Even during such periods of
time when insiders will be permitted to sell the Company’s securities, an insider cannot trade in the Company’s securities
if he or she is in possession of material non-public information. Accordingly, unlike public stockholders who could exercise their warrants
and sell the shares of Class A common stock received upon such exercise freely in the open market in order to recoup the cost of such
exercise, the insiders could be significantly restricted from selling such securities. As a result, The Company believes that allowing
the holders to exercise such warrants on a cashless basis is appropriate.
In order to finance transaction
costs in connection with an intended initial business combination, the Company’s sponsor or an affiliate of the Company’s
sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required.
If the Company completes the Company’s initial business combination, the Company would repay such loaned amounts out of the proceeds
of the trust account released to the Company. In the event that the Company’s initial business combination does not close, the
Company may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from the
Company’s 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 $1.50 per warrant at the option of the lender. Such warrants would be identical to the private placement warrants, including
as to exercise price, exercisability and exercise period. Except for the foregoing, the terms of such loans, if any, have not been determined
and no written agreements exist with respect to such loans.
Note 5 — Private Placement
Simultaneously with the
closing of the IPO, the Sponsor and the Representatives purchased an aggregate of 7,500,000 Private Warrants at a purchase price of $1.50
per Private Unit, generating gross proceeds to the Company of $11,250,000. Except to the extent described in Note 4 above, the Private
Warrants (and the underlying securities) are identical to the Warrants sold as part of the Units in the IPO. At the issuance date of
March 8, 2021 the fair value of the Private Warrants was determined to be $11,779,653; $529,653 in excess of the $11,250,000 received
by the Company. This excess fair value of $529,653 is recognized as an expense in the statement of operations.
Note 6 — Related Party Transactions
Founder Shares
On December 31, 2020, the Sponsor purchased
7,187,500 shares of Class B common stock (the “Founder Shares”) for $25,000, or approximately $0.003 per share. On February
11, 2021, the Company effected a stock split, by means of issuing an additional 1,437,500 founder shares, paid out of the Company’s
share premium account and accordingly credited as fully paid, to the Company’s sponsor, resulting in 8,625,000 founder shares issued
and outstanding. On February 19, 2021, the Company effected a further stock split, by means of issuing an additional 2,875,000 founder
shares, paid out of the Company’s share premium account and accordingly credited as fully paid, to the Company’s sponsor,
resulting in 11,500,000 founder shares issued and outstanding. All shares and associated amounts have been retroactively restated to
reflect the stock splits (see Note 9). The Founder Shares are identical to the Class A common stock included in the Units sold in the
IPO except that the Founder Shares are subject to certain transfer restrictions, as described in more detail below. Each Founder Share
is automatically convertible to a share of Class A common stock on a one-for-one basis at the time of the Company’s initial business
combination. The Sponsor had agreed to forfeit up to 1,500,000 Founder Shares to the extent that the over-allotment option was not exercised
in full by the underwriters. Because the underwriter did not exercise its option, the forfeiture was enacted in the quarter ended September
30, 2021.
The Company’s initial stockholders have
agreed not to transfer, assign or sell any of their Founder Shares until the earlier of (A) one year after the completion of the Company’s
initial Business Combination, or earlier if, subsequent to the Company’s initial Business Combination, the last sale price of the
Company’s common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations
and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Company’s initial
Business Combination or (B) the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction
after the initial Business Combination that results in all of the Company’s stockholders having the right to exchange their shares
of common stock for cash, securities or other property (the “Lock Up Period”).
Due to Related Party
The amount due to related parties prior to the
closing of the IPO of $128,628 for the payment of certain offering costs and taxes was repaid on March 16, 2021.
As of September 30, 2021, the Company owed $70,000
to related parties on accounts of unreimbursed expenses incurred in connection with the sourcing of its initial business combination
and the transactions contemplated by the Merger Agreement.
Working Capital Loans
In order to finance transaction costs in connection
with a Business Combination, 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 a
Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company.
Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination
does not close, the Company may use a portion of 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 $1,500,000 of such Working Capital Loans
may be convertible into warrants at a price of $1.50 per warrant agreement per warrant at the option of the lender. The warrants would
be identical to the private placement warrants, including as to exercise price, exercisability and exercise period. At September 30,
2021 and December 31, 2020, no Working Capital Loans were outstanding.
Note 7 — Commitments and Contingencies
Registration Rights
The holders of the founder shares and private
placement warrants and any warrants that may be issued upon conversion of working capital loans (and any Class A common stock issuable
upon the exercise of the private placement warrants and warrants that may be issued upon conversion of working capital loans) will be
entitled to registration rights pursuant to a registration and stockholder rights agreement to be signed prior to or on the effective
date of the IPO. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company
register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration
statements filed subsequent to the Company’s completion of the Company’s initial business combination and rights to require
the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The Company will bear the expenses
incurred in connection with the filing of any such registration statements.
Underwriters Agreement
On March 8, 2021, the underwriters were paid
a cash underwriting discount of 2% of the gross proceeds of the IPO, or $8,000,000. The underwriters are entitled to a deferred fee of
$0.35 per Unit, or $14,000,000 in the aggregate. The deferred fee will become payable to the underwriter from the amounts held in the
Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
The underwriters had a 45-day option from the date of the IPO to purchase up to an additional 6,000,000 units to cover over-allotments,
which expired unexercised.
The Company has entered into agreements with
certain advisors and professionals who will receive payments under contingent fee arrangements upon completion of the transactions contemplated
by the Merger Agreement (see Note 11). The ultimate amount of such payments will be quantified at or near the time of closing.
Note 8 — Class A common stock subject
to possible redemption
Class A common stock subject to possible redemption
is classified as a liability instrument and is measured at fair value. A summary of the activity in the account is summarized as follows:
Proceeds at issuance date (March 8, 2021) | |
$ | 400,000,000 | |
Less: proceeds allocated to public warrants | |
| (20,533,964 | ) |
Less: Class A common stock issuance cost | |
| (21,508,580 | ) |
Plus: Accretion of carrying value to redemption value | |
| 42,042,544 | |
Balance at March 31, 2021, June 30, 2021 and September 30, 2021 | |
$ | 400,000,000 | |
Note 9 — Stockholders’ Equity
(Deficit)
Preferred Stock — The Company is
authorized to issue a total of 1,000,000 shares of preferred stock at par value of $0.0001 each. At September 30, 2021 and December 31,
2020, there were no preferred shares issued or outstanding.
Class A common stock — The Company
is authorized to issue a total of 450,000,000 shares of Class A common stock at par value of $0.0001 each. As of September 30, 2021 and
December 31, 2020 40,000,000 and 0 shares of Class A common stock subject to possible redemption issued and outstanding, respectively.
Class B common stock — The Company
is authorized to issue a total of 50,000,000 shares of Class B common stock at par value of $0.0001 each. On December 31, 2020, the Sponsor
purchased 7,187,500 shares of Class B common stock (the “Founder Shares”) for $25,000, or approximately $0.003 per share.
On February 11, 2021, the Company effected a stock split, by means of issuing an additional 1,437,500 founder shares, paid out of the
Company’s share premium account and accordingly credited as fully paid, to the Company’s sponsor, resulting in 8,625,000
founder shares issued and outstanding. On February 19, 2021, the Company effected a further stock split, by means of issuing an additional
2,875,000 founder shares, paid out of the Company’s share premium account and accordingly credited as fully paid, to the Company’s
sponsor, resulting in 11,500,000 founder shares issued and outstanding. All shares and associated amounts have been retroactively restated
to reflect the stock splits (see Note 6). This number includes 1,500,000 shares of Class B common stock which were forfeited because
the over-allotment option was not exercised by the underwriters (See Note 6). At September 30, 2021 and December 31, 2020 there were
10,000,000 and 11,500,000 shares issued and outstanding, respectively.
The Company’s initial stockholders have
agreed not to transfer, assign or sell any of their Founder Shares until the earlier of (A) one year after the completion of the Company’s
initial Business Combination, or earlier if, subsequent to the Company’s initial Business Combination, the last sale price of the
Company’s common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations
and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Company’s initial
Business Combination or (B) the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction
after the initial Business Combination that results in all of the Company’s stockholders having the right to exchange their shares
of common stock for cash, securities or other property (the “Lock Up Period”).
The shares of Class B common stock will automatically
convert into shares of Class A common stock at the time of our initial business combination on a one-for-one basis (subject to adjustment
for stock splits, stock dividends, reorganizations, recapitalizations and the like), and subject to further adjustment as provided herein.
In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the
amounts sold in the IPO and related to the closing of the business combination, the ratio at which shares of Class B common stock shall
convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common
stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common
stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the
sum of the total number of all shares of common stock outstanding upon completion of the IPO plus all shares of Class A common stock
and equity-linked securities issued or deemed issued in connection with the business combination. as required by law, holders of our
founder shares and holders of our public shares will vote together as a single class, with each share entitling the holder to one vote.
Note 10 — Recurring Fair Value Measurements
Investment Held in Trust Account
As of September 30, 2021, investment securities
in the Company’s Trust Account consisted of a mutual funds that invest primarily in U.S. government securities in the amount of
$400,025,812 . Since all of the Company’s permitted investments consist of treasury securities, fair values of its investments
are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assets.
Warrant Liability
At September 30, 2021, the Company’s warrants
liability was valued at $32,054,172. Under the guidance in ASC 815-40 the warrants do not meet the criteria for equity treatment. As
such, the warrants must be recorded on the balance sheet at fair value. This valuation is subject to re-measurement at each balance sheet
date. With each re-measurement, the warrant valuation will be adjusted to fair value, with the change in fair value recognized in the
Company’s statement of operations.
Overallotment Option
Upon completion the IPO, the underwriters
held an overallotment option which expired 45 days later. The overallotment option represents a financials instrument which was recognized
at fair value as a liability instrument at inception. The principal assumptions going into the fair value computation were as follows:
Term – 45 days; Unit price $10.00, risk free rate 0.04%, volatility 16.7%. Upon expiration, the change in fair value to zero was
recognized in the Company’s statement of operations.
The change in the fair value of the overallotment liability for the
period ended June 20, 2021 is summarized as follows:
| |
Overallotment
Option
Liability
(as restated) | |
Fair value at issuance March 8 2021 | |
$ | 1,406,950 | |
Change in fair value | |
| (969,375 | ) |
Fair Value at March 31, 2021 | |
| 437,575 | |
Change in fair value | |
| (437,575 | ) |
Fair Value at June 30, 2021 and September 30, 2021 | |
$ | - | |
Recurring Fair Value Measurements
The Company’s investments consist of mutual
funds that invest primarily in U.S. government securities. Fair values of these investments are determined by Level 1 inputs utilizing
quoted prices (unadjusted) in active markets for identical assets. The Company’s 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. The fair
value of the warrant liability is classified within Level 3 of the fair value hierarchy. The Public Warrants were transferred to Level
1 for the period ending September 30,
2021.
The
following table presents fair value information as of September 30, 2021 of the Company’s financial assets and liabilities that
were accounted for at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques the Company
utilized to determine such fair value.
| |
Carrying Value | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
Assets: | |
| | | |
| | | |
| | | |
| | |
Investments held in Trust Account - | |
| | | |
| | | |
| | | |
| | |
U.S. Treasury Securities | |
| | | |
| | | |
| | | |
| | |
Market Fund | |
$ | 400,025,812 | | |
$ | 400,025,812 | | |
| — | | |
| — | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Private Placement Warrants | |
| 14,187,504 | | |
| — | | |
| — | | |
| 14,187,504 | |
Public Warrants | |
| 17,866,666 | | |
| 17,866,666 | | |
| — | | |
| — | |
Measurement
The Company established the initial fair value
for the Warrants as of March 8, 2021, which was the date of the consummation of the Company’s IPO, and the fair value for the Warrants
is remeasured at the end of each reporting period. For the initial periods, neither the Public Warrants nor the Private Warrants were
separately traded on an open market, but the Public Warrants did commence separate trading as of April 26, 2021. As such, the Company
used a Monte Carlo simulation model to value the Warrants for the initial periods and valued the Public Warrants based upon market values
for the September 30,2021 remeasurement. The Company allocated the proceeds received from (i) the sale of Units (which is inclusive of
one share of Class A common stock and one-third of one Public Warrant), (ii) the sale of Private Warrants, and (iii) the issuance of
Class B common stock, first to the Warrants based on their fair values as determined at initial measurement, with the remaining proceeds
allocated to Class A common stock subject to possible redemption (temporary equity), Class A common stock (permanent equity) and Class
B common stock (permanent equity) based on their relative fair values at the initial measurement date. The Warrants were initially classified
within Level 3 of the fair value hierarchy at the initial measurement dates due to the use of unobservable inputs. The aggregate fair
value of the Public Warrants, which amounted to $20,553,963 at March 8, 2021 and $20,256,080 at March 31, 2021 and April 26, 2021, was
transferred to Level 1 following the detachment of the warrants for separate trading and at which time quoted prices existed in active
markets. The key inputs into the Monte Carlo simulation model for the Warrants were as follows at March 31, 2021 and April 26, 2021 at
initial measurement and at September 30, 2021 for the private warrants:
| |
March 8,
2021 (Initial Measurement) | | |
March 31,
2021 and April 26,
2021 | | |
September 30,
2021 | |
Risk-fee interest rate | |
| 1.00 | % | |
| 1.07 | % | |
| 1.03 | % |
Expected term (years) | |
| 5.70 | | |
| 5.60 | | |
| 5.28 | |
Expected volatility | |
| 24.2 | % | |
| 24.4 | % | |
| 25.6 | % |
Exercise price | |
$ | 11.50 | | |
| 11.50 | | |
$ | 11.50 | |
Probability of completing a business combination | |
| 90 | % | |
| 90 | % | |
| 98 | % |
Dividend yield | |
| 0 | % | |
| 0 | % | |
| 0 | |
The change
in the fair value of the warrant liabilities for the period ended September 30, 2021 is summarized as follows (restated):
| |
Public Warrants | | |
Private Warrants | | |
Total Warrants | |
Fair value at issuance March 8, 2021 | |
$ | 20,553,964 | | |
$ | 11,779,653 | | |
$ | 32,333,617 | |
Change in fair value | |
| (2,687,298 | ) | |
| 2,407,851 | | |
| (279,447 | ) |
Fair Value at September 30, 2021 | |
$ | 17,866,666 | | |
$ | 14,187,504 | | |
$ | 32,054,170 | |
Note 11 — Subsequent
Events
On October 15, 2021, Adam
Snitkoff, a purported stockholder of the Company, filed a complaint in the Supreme Court of the State of New York, naming the Company,
Syniverse and the directors of the Company as defendants. The complaint alleges claims for fraudulent and negligent misrepresentation
and concealment in connection with allegedly false and misleading statements and omissions in the Company’s proxy statement concerning
the proposed Business Combination. The complaint seeks, among other things, injunctive relief and compensatory damages. The defendants
believe the claims asserted in the lawsuit are without merit. The Company cannot predict the outcome of or estimate the possible loss
or range of loss from this matter. Additional complaints or demands may be filed in connection with the Business Combination, which could
prevent or delay completion of the Business Combination and result in substantial costs to the Company. If additional similar complaints
or demands are filed or made, absent new or different allegations that are material, the Company will not necessarily announce them.
Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations
References in this report (the “Quarterly Report”)
to “we,” “us” or the “Company” refer to M3-Brigade Acquisition II Corp. References to our “management”
or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to M3-Brigade
Sponsor LP. The following discussion and analysis of the Company’s financial condition and results of operations should be read
in conjunction with the 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.
Special 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 and Section 21E of 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 Form 10-Q including 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 “expect,”
“believe,” “anticipate,” “intend,” “estimate,” “seek” and variations 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. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except
as expressly required by applicable securities law, 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 16, 2020 and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase,
reorganization or similar business combination with one or more businesses. We intend to consummate an initial business combination using
cash from the proceeds of our Public Offering (the “Public Offering”) that closed on March 8, 2021 (the “Closing Date”)
and the Private Placement, and from additional issuances of, if any, our equity and our debt, or a combination of cash, equity and debt.
Results of Operations
For the three months ended September 30, 2021, we incurred
a loss from operations of $3,234,511, including professional fees of $300,211 insurance expenses of $154,300 and merger related expenses
totaled $2,780,000. In addition to the loss from operations, we recorded a loss on the fair value of the warrants of $3,541,131 and interest
income of $5,147.
For the nine months ended September 30, 2021, we incurred
a loss from operations of $4,961,385 including professional fees of $390,169, insurance expenses of $291,216 and merger related expenses
totaled $4,280,000. In addition to the income from operations, we incurred other net expenses of $83,157 consisting of Public Offering
costs of $1,265,712, excess fair value of the warrants sold in the private placement of $529,653, offset by a gain on the change in the
fair value of the warrants of $279,446, gain on the change in the fair value of the overallotment option of $1,406,950 and interest income
of $25,812.
Through September 30, 2021, our efforts have been limited
to organizational activities, activities relating to identifying and evaluating prospective acquisition candidates and activities relating
to general corporate matters. We have not generated any revenues from operations, other than interest income on the proceeds held in
the Trust Account. As of September 30, 2021 and at December 31, 2020, $400,025,812 and $0 was held in the Trust Account, respectively.
We had cash outside of trust of $1,124,039 and $0 in September 30, 2021 and December 31, 2020, respectively and $4,176,340 and $70,000
in accounts payable and accrued expenses and due to affiliates as of September 30, 2021, respectively. Note that $4.0 million of the
accounts payable was related to the terminated merger discussions, and ultimately forgiven by the vendor.
Except for the withdrawal of interest to pay our taxes
and up to $100,000 to pay dissolution expenses, if any, our amended and restated certificate of incorporation (the “Charter”)
provides that none of the funds held in trust will be released from the Trust Account until the earliest of (i) the completion of an
initial business combination; (ii) the redemption of any of the shares of Class A common stock included in the units sold in the Public
Offering (the “Units”) properly submitted in connection with a stockholder vote to amend the Charter to modify the substance
or timing of the Company’s obligation to redeem 100% of the common stock included in the Units being sold in the Public Offering
if the Company does not complete an initial business combination within 18 months from the closing of the Public Offering or with respect
to any other material provisions relating to stockholders’ rights or pre-initial business combination activity or (iii) the redemption
of 100% of the shares of Class A common stock included in the Units sold in the Public Offering if we are unable to complete a business
combination within such 18 month period. Through September 30, 2021, we have not withdrawn any funds from interest earned on the trust
proceeds. Other than the deferred underwriting discounts and commissions, no amounts are payable to the underwriters of the Public Offering
in the event of a business combination.
Liquidity and Capital Resources
As of September 30, 2021, we had cash outside our Trust
Account of $1,124,039, available for working capital needs. We intend to use the funds held outside the Trust Account for identifying
and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and
from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements
of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the Business
Combination.
On March 8, 2021, we completed the sale of 40,000,000
units (the “Units” and, with respect to the shares of Class A common stock included in the Units being offered, the “Public
Shares”) at $10.00 per Unit, generating gross proceeds of $400,000,000.
Simultaneous with the closing of the Public Offering, we completed
the sale of 7,500,000 warrants (the “Private Warrants”), at a price of $1.50 per Private Warrant, generating gross proceeds
of $11,250,000.
In connection with the Public Offering, the underwriters
were granted a 45-day option from the effectiveness date of our IPO (March 3, 2021) to purchase up to 6,000,000 additional Units to cover
over-allotments, if any. In April the underwriters’ option expired unexercised.
Following our Initial Public Offering and the sale of the Private
Warrants, a total of $400,000,000 ($10.00 per Unit) was placed in the Trust Account. We incurred $22,706,155 in Initial Public Offering
related costs, including $8,000,000 of underwriting fees, $14,000,000 of deferred underwriting discount and $706,155 of other costs with
$1,265,712 which was allocated to the Public Warrants and Private Warrants, included in the statement of operations and $21,440,443 included
in stockholders’ equity.
As of September 30, 2021, we had
marketable securities held in the Trust Account of $400,025,812 (including $25,812 of income) consisting of mutual funds. Income on the
balance in the Trust Account may be used to pay taxes. Through September 30, 2021, we did not withdraw any interest earned on the Trust
Account to pay our income taxes.
For nine months ended September 30, 2021, cash used in operating activities
was ($1,514,806). Net loss of ($5,044,542) was primarily comprised of Public Offering costs of $1,265,712 and a non-cash charge to earnings
related to the excess fair value of our warrants of $529,653, offset by a non-cash gain in earnings of $279,446 related to the change
in fair value of our warrants a non-cash gain of $1,406,950 related to the change in the fair value of the overallotment option and interest
income $25,812 from our trust account. Further, the change in prepaid insurance and accounts payable and accrued expenses used net cash
of $3,446,579.
We intend to use substantially all of the funds held
in the Trust Account, to acquire a target business and to pay our expenses relating thereto. To the extent that our equity or debt is
used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the Trust Account
will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our
growth strategies.
Management believes that the cash
in the operating bank account will be sufficient to fund operating expenses prior to the Business Combination. In order to finance transaction
costs in connection with a Business Combination, the Company’s Sponsor or an affiliate of the Sponsor or certain of the Company’s
officers and directors may, but are not obligated to, provide Working Capital Loans to the Company.
Further, our sponsor, officers and directors or their respective
affiliates may, but are not obligated to, loan us funds as may be required (the “Working Capital Loans”). If we complete
a business combination, we would repay the Working Capital Loans. In the event that a business combination does not close, we may use
a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would
be used to repay the Working Capital Loans. Such Working Capital Loans would be evidenced by promissory notes. The notes would either
be repaid upon consummation of a business combination, without interest, or, at the lender’s discretion, or converted upon consummation
of a business combination into additional Private Warrants at a price of $1.50 per Private Warrant. As of September 30, 2021, no Working
Capital Loans have been issued.
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 these funds for paying existing accounts payable,
identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses,
travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business
Combination. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating
a business combination is 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, in addition to the access to the Working Capital Loans, we may need to obtain other financing
either to complete our business combination or because we become obligated to redeem a significant number of our public shares upon consummation
of our business combination, in which case we may issue additional securities or incur debt in connection with such business combination.
Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our
business combination. If we are unable to complete our business combination because we do not have sufficient funds available to us,
we will be forced to cease operations and liquidate the Trust Account. In addition, following our business combination, if cash on hand
is insufficient, we may need to obtain additional financing in order to meet our obligations.
Off-Balance Sheet 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 entered into any non-financial
agreements involving assets.
Contractual obligations
We do not have any long-term debt, capital lease obligations,
operating lease obligations or long-term liabilities.
The underwriters are entitled to a deferred fee of $0.35
per Unit, or $14,000,000 in the aggregate. The deferred fee will become payable to the underwriter from the amounts held in the Trust
Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of condensed financial statements and
related disclosures in conformity with accounting principles generally accepted in the United States requires our 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 condensed financial statements, and income and expenses during the periods reported. Actual results could materially
differ from those estimates. We have identified the following as our critical accounting policies:
Warrant Liabilities
The Company’s Warrants meet the definition of a
derivative and are recorded as derivative liabilities on the Balance Sheet and measured at fair value. At each reporting date, changes
in the fair value are recognized in the statement of operations in the period of change.
Overallotment Option Liability
The Company’s
Overallotment Option meet the definition of a derivative and are recorded as a liability on the Balance Sheet and measured at fair value.
At each reporting date changes in the fair value are recognized in the statement of operations in the period of change.
Redeemable Shares of Class A Common Stock
All of the 40,000,000 shares of Class A common stock
included in the Units sold as part of the Public Offering contain a redemption feature as described in the prospectus for the Public
Offering. In accordance with FASB ASC 480, “Distinguishing Liabilities from Equity”, redemption provisions not solely within
the control of the Company require the security to be classified outside of permanent equity. The Charter provides a minimum net tangible
asset threshold of $5,000,001. The Company restated the components of the potentially redeemable stock that had been recorded as a component
of stockholder’s equity into the Class A common stock subject to potential redemption such that the entire proceeds of the Public
Offering plus earnings on the trust is classified outside of permanent equity.
Net Loss per Common Stock
Net income (loss) per share of common stock is computed
by dividing net income (loss) by the weighted average number of shares of common stock outstanding for each of the periods. The calculation
of diluted income (loss) per common stock does not consider the effect of the warrants issued in connection with the (i) Initial Public
Offering, and (ii) Private Placement Warrants since the exercise of the warrants are contingent upon the occurrence of future events
and the inclusion of such warrants would be anti-dilutive.
The Company’s statements of operations include
a presentation of income (loss) per share for Class A Common Stock subject to possible redemption in a manner similar to the two-class
method of income (loss) per common stock. As of September 30, 2021, the Company did not have any dilutive securities and other contracts
that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted
loss per share is the same as basic loss per share for the period presented.
Recently Adopted Accounting Standards
In August 2020, the Financial Accounting Standards Board (“FASB”)
issued Accounting Standards Update (“ASU”) 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)” (“ASU 2020- 06”)
to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial
conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining
to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible
debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings
per share guidance, including the requirement to use the if converted method for all convertible instruments. ASU 2020-06 is effective
January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1,
2021. The Company adopted ASU 2020-06 effective January 1,2021. The adoption of ASU 2020-06 did not have an impact on the Company’s
financial statements.
Recent Accounting Standards
Management does not believe that any recently
issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our condensed financial
statements.