Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
No ☒
Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐
No ☒
Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes ☒ No ☐
Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has
fi led a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting
under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report. ☐
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒
No ☐
The aggregate market value
of the voting stock held by non-affiliates of the Registrant on June 30, 2021, based upon the closing price of $9.67 of the Registrant’s
common stock as reported on the New York Stock Exchange, was approximately $222.41 million. Common stock held by each officer and director
and by each person known to the registrant who owned 10% or more of the outstanding voting and non-voting common stock have been excluded
in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination
for other purposes.
As of December 31, 2021, 23,000,000
shares of Class A common stock, par value $0.0001 per share, and 5,750,000 shares of Class B common stock par value $0.0001 per share,
were issued and outstanding, respectively.
The accompanying notes are an integral part of
these financial statements.
The accompanying notes are an integral part of
these financial statements.
The accompanying notes are an integral part of
these financial statements.
The accompanying notes are an integral part of
these financial statements.
The Music Acquisition Corporation
(the “Company”) is a newly organized blank check company incorporated as a Delaware corporation on October 14, 2020. The Company
was formed for the purpose of effecting a merger, stock exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses (“Business Combination”).
As of December 31, 2021, the
Company had not commenced any operations. All activity for the year ended December 31, 2021, relates to the Company’s formation
and the Initial Public Offering (“IPO”) as described below, and identifying a target company for a Business Combination. The
Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The
Company generates non-operating income in the form of interest income from the proceeds derived from the IPO.
The registration statement
for the Company’s IPO was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on February
2, 2021 (the “Effective Date”). On February 5, 2021, the Company consummated the IPO of 23,000,000 units (the “Units”
and, with respect to the shares of Class A common stock included in the Units sold, the “public shares”), which included the
full exercise by the underwriters of the over-allotment option to purchase an additional 3,000,000 Units, at $10.00 per Unit, generating
gross proceeds of $230,000,000, which is discussed in Note 2. Each Unit consists of one share of common stock, and one-half of one redeemable
warrant to purchase one share of Class A common stock at a price of $11.50 per whole share.
Simultaneously with the closing
of the IPO, the Company consummated the sale of 6,600,000 Private Placement Warrants (the “Private Placement Warrants”), at
a price of $1.00 per Private Placement Warrant, in a private placement to Music Acquisition Sponsor, LLC, a Delaware limited liability
company (the “Sponsor”), generating gross proceeds of $6,600,000, which is discussed in Note 3.
Transaction costs of the IPO
amounted to $13,101,431 consisting of $4,600,000 of underwriting discount, $8,050,000 of deferred underwriting discount, and $451,431
of other offering costs.
Following the closing of the
IPO on February 5, 2021, $230,000,000 ($10.00 per Unit) from the net offering proceeds of the sale of the Units in the IPO and the sale
of the Private Placement Warrants was placed in a trust account (the “Trust Account”) and invested in United States “government
securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company
Act”), having a maturity of 185 days or less or in money market funds meeting certain conditions of Rule 2a-7 promulgated under
the Investment Company Act which invests only in direct U.S. government treasury obligations, until the earliest of (a) the completion
of the Company’s initial Business Combination, (b) the redemption of the Company’s public shares if the Company is unable
to complete the initial Business Combination within 24 months from the closing of the IPO, subject to applicable law, and (c) the redemption
of the Company’s public shares properly submitted in connection with a stockholder vote to amend the Company’s amended and
restated certificate of incorporation.
The Company’s Business
Combination must be with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held
in the Trust Account (excluding the amount of any deferred underwriting discount held in trust and taxes payable) at the time of the signing
a definitive agreement in connection with an initial Business Combination. However, the Company will only complete a Business Combination
if the post transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires
a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company
Act. There is no assurance that the Company will be able to successfully effect a Business Combination.
The Company will provide its
public holders of its outstanding public shares (the “public stockholders”) with the opportunity to redeem all or a portion
of their public shares upon the completion of the initial Business Combination either (i) in connection with a stockholder meeting called
to approve the initial Business Combination or (ii) without a stockholder vote by means of a tender offer. Except for as required by applicable
law or stock exchange listing requirements, the decision as to whether the Company will seek stockholder approval of a proposed Business
Combination or conduct a tender offer will be made by the Company, solely in its discretion.
The stockholders will be entitled
to redeem their shares for a pro rata share of the aggregate amount then on deposit in the Trust Account calculated as of two business
days prior to the consummation of the initial Business Combination, including interest earned on the funds held in the Trust Account (net
of amounts which may be withdrawn to pay taxes), divided by the number of then outstanding public shares, subject to the limitations described
in the prospectus. The amount in the Trust Account is initially anticipated to be $10.00 per public share. The redemption rights will
include the requirement that a beneficial holder must identify itself in order to validly redeem its shares. The per share amount the
Company will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions the
Company will pay to the underwriters in the IPO.
The Company will have only
24 months from the closing of the IPO to complete an initial Business Combination (the “Combination Period”). However, if
the Company does not complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for
the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares,
at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on
the funds held in the Trust Account and not previously released to the Company to pay its taxes (less up to $100,000 of interest to pay
dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’
rights as stockholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board
of directors, liquidate and dissolve, subject in each case to the Company’s obligations under Delaware law to provide for claims
of creditors and the requirements of other applicable law.
The Company’s initial
stockholders, officers and directors have agreed to (i) waive their redemption rights with respect to any Founder Shares (as defined below)
and public shares they hold in connection with the completion of the initial Business Combination, (ii) waive their redemption rights
with respect to any Founder Shares and public shares they hold in connection with a stockholder vote to approve an amendment to the Company’s
amended and restated certificate of incorporation, (iii) waive their rights to liquidating distributions from the Trust Account with respect
to any Founder Shares they hold if the Company fails to complete the initial Business Combination within the Combination Period, and (iv)
vote any Founder Shares and any public shares held by them in favor of the Company’s initial Business Combination.
The Company’s Sponsor
has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold
to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or
other similar agreement or Business Combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i)
$10.00 per public share and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the
Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such
liability will not apply to any claims by a third-party or prospective target business who executed a waiver of any and all rights to
the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s
indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended
(the “Securities Act”). However, the Company has not asked its Sponsor to reserve for such indemnification obligations, nor
has the Company independently verified whether its Sponsor has sufficient funds to satisfy its indemnity obligations and the Company believes
that the Company’s Sponsor’s only assets are securities of the Company. Therefore, the Company cannot assure that its Sponsor
would be able to satisfy those obligations.
Liquidity and Capital Resources
As of December 31, 2021, the
Company had approximately $0.4 million in its operating bank account and working capital of approximately $0.4 million.
The Company’s liquidity
needs up to February 5, 2021, had been satisfied through a capital contribution from the Sponsor of $25,000 (see Note 5) for the Founder
Shares and the loan under an unsecured promissory note from the Sponsor of $170,000 (see Note 5). The promissory note from the Sponsor
was paid in full as of February 8, 2021. In addition, 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 the Company Working Capital Loans (see Note 5). As of December 31, 2021, and 2020, there were no amounts outstanding under
any Working Capital Loans.
On February 25, 2022, (i) Neil
Jacobson, the Company’s Chief Executive Officer and a manager of Music Acquisition Sponsor, LLC, the Sponsor, and (ii) Todd Lowen,
the Company’s Chief Financial Officer and Chief Operating Officer and a manager of the Sponsor, (each, a “Lender” and
collectively, the “Lenders”), each loaned $40,000 to the Company, memorialized by the execution of two unsecured promissory
notes (the “Notes”) issued by the Company to the Lenders, under each of which the Company may borrow in the principal amount
of up to $250,000. The Notes do not bear interest and the principal balance will be payable on the earliest to occur of (i) the date on
which the Company consummates its initial business combination and (ii) the date that the winding up of the Company is effective (such
date, the “Maturity Date”). In the event the Company consummates its initial business combination, the respective Lender has
the option on the Maturity Date to convert all or any portion of the principal outstanding under the respective Note into that number
of warrants (“Working Capital Warrants”) equal to the portion of the principal amount of the Note being converted divided
by $1.00, rounded up to the nearest whole number. The terms of the Working Capital Warrants, if any, would be identical to the terms of
the Private Placement Warrants.
As of December 31, 2021, the
Company had approximately $371,025 in cash and working capital of $391,954 (excluding deferred offering costs) and no interest income
available in the trust account to pay for its tax obligations, if any.
To date, the Company’s
liquidity needs have been satisfied through a payment of $25,000 from the Sponsor to cover certain expenses on its behalf in exchange
for the issuance of the Founder Shares to the Sponsor, working capital loans of approximately $40,000 pursuant to promissory notes issued
to us by each of the Company’s Chief Executive Officer and Chief Financial Officer described above and the net proceeds from the
consummation of the Private Placement not held in the Trust Account.
If the Company does not consummate
an initial business combination by February 5, 2023, there will be a mandatory liquidation and subsequent dissolution of the Company.
Management has determined that the liquidity condition and mandatory liquidation, should an initial business combination not occur, and
potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments
have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after February 5, 2023.
Risks and Uncertainties
Management is continuing to
evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that it could have a negative effect
on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily
determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Note 2 - Significant Accounting Policies
Basis of Presentation
The accompanying financial
statements of the Company are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States
of America (“GAAP”) and pursuant to the rules and regulations of the SEC. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) have been made that are necessary to present fairly the financial position, and the results of its operations
and its cash flows.
Emerging Growth Company Status
The Company is an “emerging
growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart our Business Startups Act of 2012,
(the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable
to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the
auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation
in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class
of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS
Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging
growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period
which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company,
as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company
nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential
differences in accounting standards used.
Use of Estimates
The preparation of financial
statements in conformity with GAAP requires 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 financial statements and the reported amounts of revenues
and expenses during the reporting period.
Making estimates requires management
to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set
of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could
change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these
financial statements is the determination of the fair value of the warrant liability. 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 did not have any cash
equivalents as of December 31, 2021, and 2020.
Marketable Securities Held in Trust Account
At December 31, 2021, the assets
held in the Trust Account were held in money market funds which invest in U.S. Treasury securities and are presented at fair value based
upon the quoted market price (see Note 8). During the year ended December 31, 2021, the Company did not withdraw any of the interest income
from the Trust Account to pay its tax obligations.
Concentration of Credit Risk
Financial instruments that
potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times,
may exceed the Federal Depository Insurance Company coverage limit of $250,000. The Company has not experienced losses on these accounts
and management believes the Company is not exposed to significant risks on such accounts.
Warrant Liabilities
The Company does not use derivative
instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates its financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives,
pursuant to FASB ASC Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and FASB ASC Topic 815, “Derivatives
and Hedging” (“ASC 815”).
The Public Warrants and Private
Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, the Company recognizes the warrant
instruments as liabilities at fair value and adjusts the carrying value of the instruments to fair value at each reporting period until
they are exercised. The initial fair value of the Public Warrants issued in connection with the IPO and the fair value of the Private
Placement Warrants were estimated using the Monte Carlo simulation model. The fair value of the Public Warrants as of December 31, 2021,
is based on observable listed prices for such warrants. The fair value of the Private Placement Warrants as of December 31, 2021, was
estimated using the Black-Scholes simulation model. Derivative warrant liabilities are classified as non-current liabilities as their
liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Offering Costs Associated with the Initial
Public Offering
The Company complies with the
requirements of ASC 340-10-S99-1. Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the
IPO that were directly related to the IPO. Offering costs are allocated to the separable financial instruments issued in the IPO based
on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities are expensed as
incurred and presented as non-operating expenses in the statements of operations. Offering costs associated with the Class A common stock
were charged to temporary equity upon the completion of the IPO.
Class A Common Stock Subject to Possible Redemption
All the shares of Class A common
stock sold as part of the Units in the IPO 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 initial Business Combination
and in connection with certain amendments to the Company’s amended and restated certificate of incorporation. In accordance with
the 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.
Ordinary liquidation events, which involve the redemption and liquidation of all the entity’s equity instruments, are excluded from
the provisions of ASC 480. Accordingly, at December 31, 2021, all shares of Class A common stock subject to possible redemption is presented
as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheets.
The Company recognizes changes
in redemption value immediately as they occur and adjusts the carrying value of the Class A common stock subject to possible redemption
to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were
also the redemption date for the security. Effective with the closing of the Initial Public Offering, the Company recognized the accretion
from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and
accumulated deficit.
The Class A common stock subject
to possible redemption reflected on the balance sheet as of December 31, 2021, is reconciled in the following table:
| Gross Proceeds | |
$ | 230,000,000 | |
| Less: | |
| | |
| Proceeds allocated to Public Warrants | |
| (9,771,550 | ) |
| Class A common stock issuance costs | |
| (12,544,816 | ) |
| Plus: | |
| | |
| Accretion of carrying value to redemption value | |
| 22,316,366 | |
| Class A common stock subject to possible redemption | |
$ | 230,000,000 | |
Income Taxes
The Company accounts for income
taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for
both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future
tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established
when it is more likely than not that all or a portion of deferred tax assets will not be realized. The deferred tax assets were deemed
to be de minimis as of December 31, 2021, and 2020.
ASC 740 also clarifies the
accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold
and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, 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 December 31, 2021, and 2020. 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 is subject to income tax examinations by major taxing authorities since inception.
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. The provision for income taxes was deemed to be de minimis for the year ended
December 31, 2021, and 2020.
Net Income (Loss) Per Common Stock
The Company complies with
accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per share is computed
by dividing net income (loss) by the weighted average number of shares outstanding during the period, excluding stocks subject to forfeiture.
The calculation of diluted income (loss) per common share does not consider the effect of the warrants issued since the exercise of the
warrants are contingent upon the occurrence of future events. However, the diluted earnings (loss) per share calculation includes the
shares subject to forfeiture from the first day of the interim period in which the contingency on such shares was resolved (at least for
this one because it resolved this year).
Basic and diluted net income
(loss) per share for Class A common stock and Class B common stock is calculated by dividing net income (loss) attributable to the Company
by the weighted average number of shares of Class A common stock and shares of Class B common stock outstanding, allocated proportionally
to each class of common stock. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share
as the redemption value approximates fair value.
Reconciliation of Net Income (Loss) per Common
Share
Basic and diluted income (loss)
per share for Class A common stock and for Class B common stock is calculated as follows:
| | |
For the
year ended
December 31,
2021 | | |
For the
period from
October 14,
2020
(inception) to
December 31,
2020 | |
| Net Income per share for Class A common stock: | |
| | |
| |
| Allocation of net income (loss) to Class A common stock | |
$ | 2,811,320 | | |
$ | - | |
| | |
| | | |
| | |
| Weighted Average Shares, Class A common stock | |
| 20,794,521 | | |
| - | |
| Basic and diluted net income (loss) per share | |
$ | 0.14 | | |
$ | - | |
| | |
| | | |
| | |
| Net Income per share for Class B common stock: | |
| | | |
| | |
| Allocation of net income (loss) to Class B common stock | |
$ | 767,649 | | |
$ | (751 | ) |
| | |
| | | |
| | |
| Basic weighted Average Shares, Class B common stock | |
| 5,678,082 | | |
| 5,000,000 | |
| Basic net income (loss) per share | |
$ | 0.14 | | |
$ | (0.00 | ) |
| Diluted weighted Average Shares, Class B common stock | |
| 5,750,000 | | |
| 5,000,000 | |
| Diluted net income (loss) per share | |
$ | 0.13 | | |
$ | (0.00 | ) |
Fair Value of Financial Instruments
The fair value of the Company’s
assets and liabilities approximate the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term
nature.
The Company follows the guidance
in ASC 820, “Fair Value Measurement,” for its financial assets and liabilities that are re-measured and reported at fair value
at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s
financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with
the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants
at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the
use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions
about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities
based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1 - |
Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment. |
| |
|
| Level 2 - |
Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means. |
| |
|
| Level 3 - |
Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
See Note 8 for additional
information on assets and liabilities measured at fair value.
Recent Accounting Pronouncements
In August 2020, the FASB issued
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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”),
which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also
removes certain settlement conditions that are required for equity-linked contracts to qualify for scope exception, and it simplifies
the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did
not impact the Company’s financial position, results of operations or cash flows.
Management does not believe
that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on
the Company’s financial statements.
Note 3 - Initial Public Offering
Public Units
On February 5, 2021, the Company
sold 23,000,000 Units, at a purchase price of $10.00 per Unit, which included the full exercise by the underwriters of the over-allotment
option to purchase an additional 3,000,000 Units. Each Unit consists of one share of Class A common stock, and one-half of one redeemable
warrant to purchase one share of Class A common stock (the “Public Warrants”).
Public Warrants
Each whole warrant entitles
the holder to purchase one share of the Company’s Class A common stock at a price of $11.50 per share, subject to adjustment as
discussed herein. The warrants will become exercisable on the later of 12 months from the closing of the IPO or 30 days after the completion
of its initial Business Combination and 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. 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 its initial Business
Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (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 initial stockholders or their affiliates, without taking into account any Founder Shares held by the Company’s
initial stockholders or their 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 initial Business Combination on the date of the consummation of the 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 after the day on which the Company consummates the 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 below under “Redemption
of warrants” will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
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, or valid exemption from registration is available. No warrant will be
exercisable, and the Company will not be obligated to issue a share of Class A common stock upon exercise of a warrant unless the share
of 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 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 fifteen (15) business days after the closing of the initial Business Combination, it
will use its reasonable best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of
the Class A common stock issuable upon exercise of the warrants. The Company will use its best 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 by the sixtieth (60th) business day after the closing of the
initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period
when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis”
in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Class A common stock
is at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered
security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise
their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the
Company so elects, it will not be required to file or maintain in effect a registration statement, and in the event the Company does not
so elect, it will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is
not available.
Once the warrants become exercisable,
the Company may call the Public Warrants for redemption:
| | ● | in whole and not in part; |
| | | |
| | ● | at a price of $0.01 per warrant; |
| | | |
| | ● | upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and |
| | | |
| | ● | if, and only if, the last reported sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders. |
If the Company calls the warrants
for redemption as described above, the Company will have the option to require any holder that wishes to exercise his, her or its warrant
to do so on a “cashless basis.” If the Company takes advantage of this option, all holders of warrants would pay the exercise
price by surrendering their warrants in exchange for a number of shares of Class A common stock equal to the quotient obtained by dividing
(x) the product of (A) the number of shares of Class A common stock underlying the warrants and (B) the excess of the “fair market
value” of the Company’s Class A common stock (defined in the next sentence) over the exercise price of the warrants by (y)
the fair market value. The “fair market value” will mean the average last reported sales 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.
Note 4 - Private Placement
Simultaneously with the closing
of the IPO, the Sponsor purchased an aggregate of 6,600,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant,
for an aggregate purchase price of $6,600,000, in a private placement. A portion of the proceeds from the private placement was added
to the proceeds from the IPO held in the Trust Account.
The Private Placement Warrants
are identical to the Public Warrants sold in the IPO except that the Private Placement Warrants, so long as they are held by the initial
stockholders or its permitted transferees, (i) they will not be redeemable by the Company for cash, (ii) they (including the Class A common
stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold until
30 days after the completion of the Company’s initial Business Combination, and (iii) they may be exercised by the holders on a
cashless basis. If the Private Placement Warrants are held by holders other than the initial purchasers or their 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 sold in the IPO.
Note 5 - Related Party Transactions
Founder Shares
On November 25, 2020, the
Sponsor paid $25,000 in cash, or approximately $0.004 per share, to the Company in consideration for 5,750,000 shares of Class B common
stock (the “Founder Shares”). The Founder Shares included an aggregate of up to 750,000 shares which were subject to forfeiture
if the over-allotment option was not exercised by the underwriters in full. On February 5, 2021, the underwriters fully exercised their
over-allotment option, hence, the 750,000 Founder Shares are no longer subject to forfeiture.
The Sponsor has agreed not
to transfer, assign or sell any of its Founder Shares (subject to certain limited exceptions) until the earlier to occur of (i) one year
after the completion of the Company’s initial Business Combination or (ii) the date on which the Company completes a liquidation,
merger, capital stock exchange, reorganization or other similar transaction after the initial Business Combination that results in all
of the Company’s stockholders having the right to exchange their Class A common stock for cash, securities or other property (the
“Lock-up”). Notwithstanding the foregoing, if (A) the last reported sales price of the Company’s Class A common stock
equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like)
for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination or (B) the
Company consummates a transaction after the initial Business Combination which results in its stockholders having the right to exchange
their shares for cash, securities or other property, the Founder Shares will be released from the Lock-up.
Promissory Note - Related Party
On November 25, 2020, the
Company issued an unsecured promissory note to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount
of $300,000 to be used for a portion of the expenses of the IPO. This loan was non-interest bearing, unsecured and due at the earlier
of June 30, 2021 or the closing of the IPO. As of the IPO on February 5, 2021, the Company had drawn down $170,000 under the promissory
note. On February 8, 2021, the Company paid the $170,000 balance on the note in full. As of December 31, 2021, and 2020, there were borrowings
outstanding under the promissory note of $0 and $120,000, respectively. As of December 31, 2021, the note is no longer available to be
drawn upon.
Related Party Loans
In order to fund working capital
deficiencies or finance transaction costs in connection with an intended initial Business Combination, the Sponsor or an affiliate of
the Sponsor or certain of the Company’s officers and directors or their respective affiliates may, but are not obligated to, loan
the Company funds as may be required on a non-interest basis (“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 of 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 of the post Business Combination entity at a price of $1.00 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.
As of December 31, 2021, and 2020, no such Working Capital Loans were outstanding.
Administrative Service Fee
The Company agreed to pay
an affiliate of the Company’s Sponsor a monthly fee of $15,000 for office space, secretarial and administrative services. Upon completion
of the Company’s Business Combination or its liquidation, the Company will cease paying these monthly fees. For the years ended
December 31, 2021 and 2020, the Company has incurred administrative service fees of $165,000 and $0, respectively. At December 31, 2021
and 2020, no amounts were outstanding for administrative service fees.
Note 6 - Commitments and Contingencies
Registration and Stockholder Rights
The holders of the Founder
Shares, 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 rights agreement dated as of February 2, 2021, by and between the Company and the parties thereto, requiring
the Company to register such securities and any other securities of the Company acquired by them prior to the consummation of the initial
Business Combination for resale. The holders of these securities are entitled to make up to three demands, excluding short form demands,
that the Company registers such securities. In addition, the holders have certain “piggy-back” registration rights to include
their securities in other registration statements filed by the Company.
Underwriting Agreement
The underwriters had a 45-day
option from the date of the IPO to purchase up to an aggregate of 3,000,000 additional Units at the public offering price less the underwriting
commissions to cover over-allotments, if any. On February 5, 2021, the underwriters fully exercised their over-allotment option and were
paid a cash underwriting discount of $0.20 per Unit, or $4,600,000 in the aggregate.
The underwriters are entitled
to deferred underwriting fees of 3.5% of the gross proceeds of the IPO, or $8,050,000 in the aggregate. The deferred fee will be payable
to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes an initial Business Combination,
subject to the terms of the underwriting agreement.
Note 7 - Stockholders’ Equity (Deficit)
Preferred Stock
- The Company is authorized to issue a total of 1,000,000 preferred shares at par value of $0.0001 each. At December 31, 2021, and 2020,
there were no shares of preferred stock issued or outstanding.
Class A Common Stock
- The Company is authorized to issue a total of 380,000,000 shares of Class A common stock at par value of $0.0001 each. At December
31, 2021, and 2020, there were no shares issued and outstanding, excluding 23,000,000 and no stocks subject to possible redemption, respectively.
Class B Common Stock
- The Company is authorized to issue a total of 20,000,000 shares of Class B common stock at par value of $0.0001 each. At December
31, 2021, and 2020, there were 5,750,000 shares issued and outstanding.
The shares of Class B common
stock will automatically convert into shares of the Company’s Class A common stock at the time of the closing of its 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 connection with the initial Business Combination, the number of shares of Class A common stock
issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis, 20% of the total number of shares
of Class A common stock outstanding after such conversion (after giving effect to any redemptions of shares of Class A common stock by
public stockholders), including the total number of shares of Class A common stock issued, or deemed issued or issuable upon conversion
or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the
consummation of the initial Business Combination, excluding any shares of Class A common stock or equity-linked securities or rights exercisable
for or convertible into shares of Class A common stock issued, or to be issued, to any seller in the initial Business Combination and
any Private Placement Warrants issued to the Sponsor, officers or directors upon conversion of Working Capital Loans, provided that such
conversion of Founder Shares will never occur on a less than one-for-one basis.
Stockholders of record are
entitled to one vote for each share held on all matters to be voted on by stockholders. Holders of the Class A common stock and holders
of the Class B common stock will vote together as a single class on all matters submitted to a vote of the Company’s stockholders
except as required by law. Unless specified in the Company’s amended and restated certificate of incorporation, or as required by
applicable provisions of the Delaware General Corporation Law or applicable stock exchange rules, the affirmative vote of a majority of
the Company’s shares of common stock that are voted is required to approve any such matter voted on by the Company’s stockholders.
Note 8 - Fair Value Measurements
The following table presents
information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2021,
and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| | |
December 31, | | |
Quoted
Prices In
Active
Markets | | |
Significant
Other
Observable
Inputs | | |
Significant
Other
Unobservable
Inputs | |
| | |
2021 | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
| Assets: | |
| | |
| | |
| | |
| |
| U.S. Money Market held in Trust Account | |
$ | 230,018,119 | | |
$ | 230,018,119 | | |
$ | - | | |
$ | - | |
| Liabilities: | |
| | | |
| | | |
| | | |
| | |
| Public Warrants Liability | |
$ | 6,440,000 | | |
$ | 6,440,000 | | |
$ | - | | |
$ | - | |
| Private Placement Warrants Liability | |
| 3,696,000 | | |
| - | | |
| - | | |
| 3,696,000 | |
| | |
$ | 10,136,000 | | |
$ | 6,440,000 | | |
$ | - | | |
$ | 3,696,000 | |
Transfers to/from Levels 1,
2 and 3 are recognized at the end of the reporting period. The estimated fair value of the Public Warrants of $6,440,000 transferred from
a Level 3 fair value measurement to a Level 1 fair value measurement as of December 31, 2021.
Warrant Liabilities
The Warrants are accounted
for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the Balance Sheets. The warrant liabilities
are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of
warrant liabilities in the Statements of Operations.
The Company established the
initial fair value of the Public Warrants and Private Placement Warrants on February 5, 2021, the date of the Company’s IPO, using
a Monte Carlo simulation model. The Public Warrants and Private Placement Warrants were classified as Level 3 at the initial measurement
date. As of December 31, 2021, the Public Warrants were classified as Level 1 due to use of the observed trading price of the separated
Public Warrants, and the Private Placement Warrants were classified as Level 3 due to the use of unobservable inputs.
The following table presents
the changes in the fair value of Level 3 warrant liabilities for the year ended December 31, 2021:
| | |
Level 3
Warrant
Liabilities | |
| Fair Value as of December 31, 2020 | |
$ | - | |
| Initial measurement on February 5, 2021 | |
| 15,399,370 | |
| Transfer of Public Warrants to Level 1 | |
| (7,015,000 | ) |
| Change in valuation as of December 31, 2021 | |
| (4,688,370 | ) |
| Fair Value as of December 31, 2021 | |
$ | 3,696,000 | |
Level 3 inputs have inherent
uncertainties that are involved. If factors or assumptions change, the estimated fair values could be materially different. The key inputs
into the Black-Scholes simulation as of December 31, 2021, were as follows:
| Inputs | |
December 31,
2021 | |
| Risk-free interest rate | |
| 1.30 | % |
| Expected term remaining (years) | |
| 5.59 | |
| Expected volatility | |
| 9.9 | % |
| Underlying stock price | |
$ | 9.76 | |
Note 9 - Subsequent Events
The Company evaluated subsequent
events and transactions that occurred after the balance sheet date up to the date the financial statements were issued. Based upon this
evaluation, the Company did not identify any subsequent events that would have required adjustments or disclosure in the financial statements.
On February 25, 2022, (i)
Neil Jacobson, the Company’s Chief Executive Officer and a manager of Music Acquisition Sponsor, LLC, the Sponsor, and (ii) Todd
Lowen, the Company’s Chief Financial Officer and Chief Operating Officer and a manager of the Sponsor, (each, a “Lender”
and collectively, the “Lenders”), each loaned $40,000 to the Company, memorialized by the execution of two unsecured promissory
notes (the “Notes”) issued by the Company to the Lenders, under each of which the Company may borrow in the principal amount
of up to $250,000. The Notes do not bear interest and the principal balance will be payable on the earliest to occur of (i) the date on
which the Company consummates its initial business combination and (ii) the date that the winding up of the Company is effective (such
date, the “Maturity Date”). In the event the Company consummates its initial business combination, the respective Lender has
the option on the Maturity Date to convert all or any portion of the principal outstanding under the respective Note into that number
of Working Capital Warrants equal to the portion of the principal amount of the Note being converted divided by $1.00, rounded up to the
nearest whole number. The terms of the Working Capital Warrants, if any, would be identical to the terms of the Private Placement Warrants.
In February 2022, the Russian
Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including
the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action
and related sanctions on the world economy are not determinable as of the date of these financial statements. The specific impact on
the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these financial
statements.