NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
NOTE 1 — DESCRIPTION OF ORGANIZATION
AND BUSINESS OPERATIONS
Z-Work Acquisition Corp.
(the “Company”) is a blank check company incorporated in Delaware on September 30, 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 (the “Business Combination”).
The Company is not limited
to a particular industry or sector for purposes of consummating a Business Combination. The Company is an early stage and emerging growth
company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of September 30, 2022,
the Company had not commenced any operations. All activity for the period from September 30, 2020 (inception) through September 30, 2022
relates to the Company’s formation and the initial public offering (“Initial Public Offering”), which is 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 Initial Public Offering.
The registration statement
for the Company’s Initial Public Offering was declared effective on January 28, 2021. On February 2, 2021, the Company consummated
the Initial Public Offering of 23,000,000 units (the “Units” and, with respect to the Class A common stock included in the
Units sold, the “Public Shares”), which includes the full exercise by the underwriter of its over-allotment option in the
amount of 3,000,000 Units, at $10.00 per Unit, generating gross proceeds of $230,000,000 which is described in Note 3.
Simultaneously with the
closing of the Initial Public Offering, the Company consummated the sale of 4,733,333 warrants (the “Private Placement Warrants”)
at a price of $1.50 per Private Placement Warrant in a private placement to Z-Work Holdings LLC (the “Sponsor”) and Jefferies
LLC (“Jefferies”), generating gross proceeds of $7,100,000, which is described in Note 4.
Transaction costs amounted
to $13,088,318 consisting of $4,600,000 in cash underwriting fees, net of reimbursement, $8,050,000 of deferred underwriting fees and
$438,318 of other offering costs, of which $125,000 was paid through a transfer of membership interests in the Sponsor.
Following the closing of
the Initial Public Offering on February 2, 2021, an amount of $230,000,000 ($10.00 per Unit) from the net proceeds of the sale of the
Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”),
located in the United States and were invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of
the Investment Company Act of 1940, as amended (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 selected by the Company meeting certain conditions of Rule
2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and
(ii) the distribution of the funds held in the Trust Account, as described below.
The Company’s management
has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private
Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business
Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete
one or more initial Business Combinations 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 (net of amounts disbursed to management for working capital purposes, if any, and excluding
the amount of deferred underwriting discounts held in trust and taxes payable on the income earned on the Trust Account). 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 business sufficient for it not to be required to register as
an investment company under the Investment Company Act.
The Company will provide
the holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of
their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve
the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of
a Business Combination or conduct a tender offer will be made by the Company. The Public Stockholders will be entitled to redeem their
Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per Public Share, plus
any pro rata interest then in the Trust Account, net of taxes payable). There will be no redemption rights upon the completion of a Business
Combination with respect to the Company’s warrants.
The Company will only proceed
with a Business Combination if the Company has net tangible assets of at least $5,000,001 following any related redemptions and, if the
Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote
is not required by applicable law or stock exchange listing requirements and the Company does not decide to hold a stockholder vote for
business or other reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Certificate
of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”)
and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction
is required by applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business
or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not
pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor has
agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in
favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares without voting,
and if they do vote, irrespective of whether they vote for or against the proposed transaction.
Notwithstanding the foregoing,
if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules,
the Certificate of Incorporation will provide that a Public Stockholder, together with any affiliate of such stockholder or any other
person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act),
will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the Public Shares, without the prior consent
of the Company.
The Sponsor has agreed (a)
to waive its redemption rights with respect to the Founder Shares and Public Shares held by it in connection with the completion of a
Business Combination, (b) to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business
Combination by February 2, 2023 and (c) not to propose an amendment to the Certificate of Incorporation (i) to modify the substance or
timing of the Company’s obligation to allow redemptions in connection with a Business Combination or to redeem 100% of its Public
Shares if the Company does not complete a Business Combination within the Combination Period (as defined below) or (ii) with respect to
any other provision relating to stockholders’ rights or pre-business combination activity, unless the Company provides the Public
Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment. However, if the Sponsor acquires
Public Shares in or after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust
Account if the Company fails to complete a Business Combination within the Combination Period.
The Company has until February
2, 2023 to complete a Business Combination (the “Combination Period”). If the Company has not completed 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 pay 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, dissolve and liquidate, 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.
There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless
if the Company fails to complete a Business Combination within the Combination Period.
In order to protect the
amounts held in the Trust Account, the Sponsor has agreed to 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 discussed entering
into a transaction 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 public 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 monies held in the Trust Account
nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain
liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event
that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any
liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust
Account due to claims of creditors by endeavoring to have all vendors, service providers (except for the Company’s independent registered
public accounting firm), prospective target businesses and other entities with which the Company does business, execute agreements with
the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Liquidity and Going Concern
As of September 30, 2022,
the Company had $359,534 in its operating bank accounts, $230,975,701 in securities held in the Trust Account to be used for a Business
Combination or to repurchase or redeem its common stock in connection therewith and a working capital deficit of $2,812,680.
The Company intends to complete
a Business Combination by February 2, 2023. However, in the absence of a completed Business Combination, the Company may require additional
capital. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which
could include, but not necessarily be limited to, suspending the pursuit of a Business Combination. The Company cannot provide any assurance
that new financing will be available to it on commercially acceptable terms, if at all. In the event that the initial Business Combination
does not close, the Company may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no
proceeds from the 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. The warrants would be identical to the Private Placement Warrants, including
as to exercise price, exercisability and exercise period. As of September 30, 2022 and December 31, 2021, no Working Capital Loans were
outstanding.
In connection with the Company’s
assessment of going concern considerations in accordance with FASB’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures
of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that if the Company
is unable to complete a Business Combination by February 2, 2023, then the Company will cease all operations except for the purpose of
liquidating. The liquidity condition and date for mandatory liquidation and subsequent dissolution raise 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 2, 2023.
Risks and Uncertainties
Management continues to
evaluate the impact of the COVID-19 pandemic, rising interest rates and increased inflation and their macro-economic impact on the Company’s
business objectives and has concluded that while it is reasonably possible that the virus, interest rates and inflation 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 the financial statements. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Various social and political
circumstances in the U.S. and around the world (including wars and other forms of conflict, including the ongoing war between Russia and
the Ukraine, rising trade tensions between the United States and China, and other uncertainties regarding actual and potential shifts
in the U.S. and foreign, trade, economic and other policies with other countries, terrorist acts, security operations and catastrophic
events such as fires, floods, earthquakes, tornadoes, hurricanes and global health epidemics), have contributed and may continue to contribute
to increased market volatility and economic uncertainties or deterioration in the U.S. and worldwide including increases in inflation
and supply chain headwinds. The ongoing global market volatility and inflation and responses by the U.S. Federal Reserve and other central
banking systems around the world to increase interest rates could adversely affect the Company's ability to complete a business combination.
Additionally, in response to the ongoing war between Russia and Ukraine, the U.S. and other countries have imposed sanctions or other
restrictive actions against Russia. Any of the foregoing factors, including sanctions, export controls, tariffs, trade wars and other
governmental actions, could materially and adversely affect the Company's ability to complete a business combination and the value of
the Company's securities. The unaudited financial statements do not include any adjustments that might result from the outcome of
these uncertainties.
Special Meeting to Allow Early Redemption
and Liquidation
On November 10, 2022, the Company
filed a definitive proxy statement relating to a special meeting of stockholders to approve (i) an amendment to the Company’s amended
and restated certificate of incorporation (the “Charter Amendment Proposal”) and (ii), an amendment to the Investment Management
Trust Agreement, dated January 28, 2021, by and between the Company and Continental Stock Transfer & Trust Company, as trustee (the
“Trust Amendment Proposal” and together with the Charter Amendment Proposal, the “Proposals”), which would, if
implemented, allow the Company to redeem all of its outstanding Public Shares in advance of the Company’s contractual expiration
date of February 2, 2023 by changing the date by which the Company must cease all operations except for the purpose of winding up if it
fails to complete a Business Combination from February 2, 2023, to the later of (x) December 8, 2022 or (y) the date of effectiveness
of the second amended and restated charter (the “Amended Termination Date”).
If the Proposals are approved,
and because the Company will not be able to complete a Business Combination by the Amended Termination Date, the Company will immediately
after the special meeting, cease all operations, except for the purpose of winding up and as promptly as reasonably possible, but not
more than ten business days thereafter subject to lawfully available funds therefore, redeem all Public Shares (the “Mandatory Redemption”).
The Company expects to complete the Mandatory Redemption on or around December 8, 2022, if stockholders approve the Proposals. As promptly
as reasonably possible following such Mandatory Redemption, and subject to the approval of the Company’s then remaining stockholders
and the Board, in accordance with applicable law, the Company will dissolve and liquidate, subject in each case to the Company’s
obligations under the General Corporation Law of the State of Delaware to provide for claims of creditors and the requirements of other
applicable law.
The virtual special meeting will
be held on December 8, 2022 at 12 p.m. Eastern Time, and the record date for the meeting is the close of business (New York time) on November
3, 2022.
Pursuant to the amended and
restated certificate, a Public Stockholder may request that the Company redeem all or a portion of its Public Shares for cash if the Charter
Amendment Proposal is approved. Notwithstanding the foregoing, if the Charter Amendment Proposal is approved, and because the Company
will not be able to complete a Business Combination by the Amended Termination Date, the Company will be obligated to redeem all Public
Shares as promptly as reasonably possible after the Amended Termination Date. Therefore, no action is required by our Public Stockholders
to redeem their Public Shares. If the Proposals are approved, the Public Shares will be automatically redeemed as part of the Mandatory
Redemption.
Consideration of IR Act Excise Tax
On August 16, 2022, the Inflation Reduction Act
of 2022 (the “IR Act”) was signed into federal law. The IR Act, among other things, imposes a new U.S. federal 1% excise tax
on the fair market value of stock repurchased by publicly traded U.S. corporations and certain U.S. subsidiaries of publicly traded non-U.S.
corporations on or after January 1, 2023, with certain exceptions, imposed on the repurchasing corporation (the “Excise Tax”).
Because the Company is a Delaware corporation and the Company’s securities are traded on the Nasdaq, the Company will likely be
considered a “covered corporation” within the meaning of the IR Act. While not free from doubt, absent further guidance from
Congress or the U.S. Department of Treasury, there is significant risk that the Excise Tax will apply to any redemption of the Company’s
Public Shares after December 31, 2022, including redemptions in connection with a Business Combination and any amendment to the Company’s
certificate of incorporation to extend the time to consummate a business combination, unless an exemption is available. In addition, the
Excise Tax may make a transaction with the Company less appealing to potential business combination targets, and thus, potentially hinder
the Company’s ability to enter into and consummate a business combination. Further, the application of the Excise Tax in the event
of a liquidation after December 31, 2022 is uncertain, and could impact the per-share amount that would otherwise be received by the Company’s
stockholders in connection with the Company’s liquidation.
NOTE 2 — 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 8 of Regulation
S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP
have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do
not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash
flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of
a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for
the periods presented.
The accompanying unaudited
condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31,
2021, as filed with the SEC on March 29, 2022. The interim results for the three and nine months ended September 30, 2022 are not necessarily
indicative of the results to be expected for the year ending December 31, 2022 or for any future periods.
Emerging Growth Company
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
independent registered public accounting firm 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 the condensed
financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting periods.
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. Such estimates may be subject to change as
more current information becomes available and, accordingly, the actual results could differ significantly from those estimates.
Offering Costs
Offering costs consisted
of legal, accounting and other expenses incurred through the Initial Public Offering that were directly related to the Initial Public
Offering. Offering costs were allocated to the separable financial instruments issued in the Initial Public Offering based on a relative
fair value basis, compared to total proceeds received. Offering costs allocated to warrant liabilities were expensed as incurred in the
statements of operations. Offering costs associated with the Class A common stock issued were initially charged to temporary equity and
then accreted to common stock subject to redemption upon the completion of the Initial Public Offering. Offering costs amounting to $12,473,919
were charged to temporary stockholders’ equity upon the completion of the Initial Public Offering, and other offering costs of $489,399
that were charged to the statement of operations, of which $125,000 was paid through a transfer of membership interests in the Sponsor.
Class A Common Stock Subject to Possible Redemption
The Company accounts for
its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities
from Equity.” Shares of Class A common stock subject to mandatory redemption is classified as a liability instrument and is measured
at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is either within the
control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control)
is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s Class
A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence
of uncertain future events. Accordingly, at September 30, 2022 and December 31, 2021, Class A common stock subject to possible redemption
is presented as temporary equity, outside of the stockholders’ equity (deficit) section of the Company’s condensed balance
sheets.
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. There was no change to redemption value as of September 30, 2022 and December 31, 2021.
At September 30, 2022 and
December 31, 2021, the Class A common stock reflected in the condensed balance sheets are reconciled in the following table:
Gross proceeds | |
$ | 230,000,000 | |
Less: | |
| | |
Proceeds allocated to Public Warrants | |
| (8,433,334 | ) |
Class A common stock issuance costs | |
| (12,473,919 | ) |
Plus: | |
| | |
Accretion of carrying value to redemption value | |
| 20,907,253 | |
| |
| | |
Class A common stock subject to possible redemption – December 31, 2021 | |
| 230,000,000 | |
Plus: | |
| | |
Accretion of Class A common stock to redemption value | |
| 747,096 | |
| |
| | |
Class A common stock subject to possible redemption – September 30, 2022 | |
$ | 230,747,096 | |
Warrant Liabilities
The Company does not use
derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of 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 ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The
Company accounts for the Public Warrants and Private Placement Warrants (together with the Public Warrants, the “Warrants”)
in accordance with the guidance contained in ASC 815-40 under which the Warrants do not meet the criteria for equity treatment and must
be recorded as liabilities. Accordingly, the Company classifies the Warrants as liabilities at their fair value and adjusts the Warrants
to fair value at each reporting period. This liability is subject to re-measurement at each balance sheets date until exercised, and any
change in fair value is recognized in our statements of operations. See Note 9 for further discussion of the pertinent terms of the Warrants
and Note 9 for further discussion of the methodology used to determine the value of the warrant liabilities.
Income Taxes
The Company’s net deferred tax assets are
as follows:
| |
September 30, | | |
December 31, | |
| |
2022 | | |
2021 | |
Deferred tax assets | |
| | |
| |
Net operating loss carryforward | |
$ | — | | |
$ | 34,836 | |
Startup/Organization Expenses | |
$ | 1,007,117 | | |
$ | 378,594 | |
Total deferred tax assets | |
| 1,007,117 | | |
| 413,430 | |
Valuation allowance | |
| (1,007,117 | ) | |
| (413,430 | ) |
Deferred tax assets, net of allowance | |
$ | — | | |
$ | — | |
The Company accounts for
income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities
for both the expected impact of differences between the unaudited condensed financial statements and tax basis of assets and liabilities
and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation
allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of
September 30, 2022 and December 31, 2021, the Company’s deferred tax asset had a full valuation allowance recorded against it.
Our effective tax rate was 19.76 % and 0% for the three months ended September 30, 2022 and 2021, respectively, 3.43% and 0% for the
nine months ended September 30, 2022 and 2021, respectively. The effective tax rate differs from the statutory tax rate of 21% for the
three and nine months ended September 30, 2022 and 2021, due to changes in fair value in warrant liabilities, and the valuation allowance
on the deferred tax assets.
ASC 740 also clarifies the accounting for uncertainty
in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process
for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides
guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties
related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest
and penalties as of September 30, 2022 and December 31, 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 is subject to income taxation by major taxing authorities since inception.
These 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.
Net Income (Loss) Per Common Share
The Company complies with
accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per common share is
computed by dividing net income by the weighted average number of common stock outstanding for the period. Accretion associated with the
redeemable Class A common stock are excluded from earnings per share as the redemption value approximates fair value.
The following table reflects
the calculation of basic and diluted net income (loss) per common share (in dollars, except share amounts):
| |
For the Three Months Ended
September 30, 2022 | | |
For the Three Months Ended
September 30, 2021 | | |
For the Nine Months Ended
September 30, 2022 | | |
For the Nine Months Ended
September 30, 2021 | |
| |
Class A | | |
Class B | | |
Class A | | |
Class B | | |
Class A | | |
Class B | | |
Class A | | |
Class B | |
Basic and diluted net income per common share | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Allocation of net income, as adjusted | |
$ | 645,228 | | |
$ | 161,307 | | |
$ | 1,717,725 | | |
$ | 429,431 | | |
$ | 4,474,710 | | |
$ | 1,118,677 | | |
$ | 2,593,670 | | |
$ | 723,285 | |
Denominator: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares outstanding | |
| 23,000,000 | | |
| 5,750,000 | | |
| 23,000,000 | | |
| 5,750,000 | | |
| 23,000,000 | | |
| 5,750,000 | | |
| 20,304,029 | | |
| 5,662,088 | |
Basic and diluted net income per common share | |
$ | 0.03 | | |
$ | 0.03 | | |
$ | 0.07 | | |
$ | 0.07 | | |
$ | 0.19 | | |
$ | 0.19 | | |
$ | 0.13 | | |
$ | 0.13 | |
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 Corporation coverage limit of $250,000. As of September 30, 2022 and December 31, 2021, the
Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Fair Value of Financial Instruments
The fair value of the Company’s
assets and liabilities (excluding the warrant liabilities) which qualify as financial instruments under ASC Topic 820, “Fair Value
Measurement,” approximate the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their
short-term nature.
Recent 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, 2023 and should be applied on a full or modified retrospective basis, with early adoption permitted
beginning on January 1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position,
results of operation or cash flows.
Management does not believe
that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s
unaudited condensed financial statements.
NOTE 3 — INITIAL PUBLIC OFFERING
Pursuant to the Initial
Public Offering, the Company sold 23,000,000 Units, which includes a full exercise by the underwriters of their over-allotment option
in the amount of 3,000,000 Units, at a price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and one-third
of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class
A common stock at a price of $11.50 per share, subject to adjustment (see Note 8).
NOTE 4 — PRIVATE PLACEMENT
Simultaneously with the
closing of the Initial Public Offering, the Sponsor and Jefferies purchased an aggregate of 4,733,333 Private Placement Warrants (3,966,666
warrants to the Sponsor and 766,667 warrants to Jefferies), at a price of $1.50 per Private Placement Warrant ($7,100,000) from the Company
in a private placement. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50
per share, subject to adjustment (see Note 9). The proceeds from the sale of the Private Placement Warrants were added to the net proceeds
from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination
Period, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of
the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.
NOTE 5 — RELATED PARTY
TRANSACTIONS
Founder Shares
On December 1, 2020, the
Sponsor purchased 5,750,000 shares (the “Founder Shares”) of the Company’s Class B common stock for an aggregate price
of $25,000. The Founder Shares included an aggregate of up to 750,000 shares subject to forfeiture to the extent that the underwriters’
over-allotment was not exercised in full or in part, so that the number of Founder Shares would equal, on an as-converted basis, approximately
20% of the Company’s issued and outstanding common stock after the Initial Public Offering. As a result of the underwriters’
election to fully exercise their over-allotment option, the Founder Shares are no longer subject to forfeiture.
The Sponsor has agreed,
subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) one year after
the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last reported sale price of the 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 a Business Combination, or (y)
the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all
of the Public Stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Administrative Services Agreement
Pursuant to an administrative
support agreement with our sponsor, dated as of January 28, 2021, as amended, we agreed to pay our sponsor a total of $12,500 per month,
for up to 24 months, or $150,000 per year, $100,000 of which will be paid to Mr. Roston as an annual cash salary and $50,000 of which
will be paid for additional support services expected to be sourced from Communitas Capital, a venture firm of which our Executive Co-Chairman
Doug Atkin is Managing Partner. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly
fees. For the three and nine months ended September 30, 2022, the Company incurred $37,500 and $112,500 in fees for these services, respectively.
For the three and nine months ended September 30, 2021, the Company incurred $37,500 and $95,833 in fees for these services, respectively.
As of September 30, 2022 and December 31, 2021, respectively, $12,500 and $0 is included in accounts payable and accrued expenses in the
accompanying condensed balance sheets.
Promissory Note — Related
Party
On October 1, 2020, the
Sponsor issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to which the Company may borrow
up to an aggregate principal amount of $300,000. The Promissory Note was non-interest bearing. As of September 30, 2022 and December 31,
2021, there were no borrowings outstanding under the Promissory Note. Borrowings under the Promissory Note are no longer available.
Related Party 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 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. Except for the foregoing, the terms
of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working
Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion,
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
$1.50 per warrant. The warrants would be identical to the Private Placement Warrants. As of September 30, 2022 and December 31, 2021,
no such Working Capital Loans were outstanding.
Anchor Investor
P. Schoenfeld Asset Management
LP, an institutional investor (the “anchor investor” or “PSAM”) purchased 2,000,000 of the units sold in the Initial
Public Offering, or 8.7% of the units sold in our Initial Public Offering, at the public offering price of $10.00 per unit.
PSAM has also purchased
membership interests in our sponsor representing an indirect beneficial interest in 400,000 founder shares and 666,667 private placement
warrants held by our sponsor (which we refer to as the “anchor founder shares” and “anchor private placement warrants”,
respectively) for $1,000,000, which represents a price for founder shares and private placement warrants equal to those paid by other
outside investors in our sponsor. The terms to which the anchor founder shares and the anchor private placement warrants, respectively,
are subject are also substantially identical to the terms to which the remaining founder shares and private placement warrants, respectively,
are subject, except that: (i) PSAM will receive no anchor founder shares or anchor private placement warrants if it does not pay the $1,000,000
purchase price; (ii) PSAM will forfeit, for no additional consideration or refund, 75% of the anchor founder shares and 75% of the anchor
private placement warrants it has purchased if it does not also purchase 9.9% of the units in our Initial Public Offering, or if it purchases
such units but sells units or public shares or redeems public shares prior to or in connection with the completion of our initial business
combination such that it no longer holds public shares equal in number to at least 9.9% of the number of units sold in our Initial Public
Offering. Following the completion of our initial business combination, the anchor founder shares and the anchor private placement warrants,
respectively, will be subject to the same lock-up restrictions as all other founder shares and private placement warrants, respectively.
Following the completion of our initial business combination, PSAM’s public shares will be subject to a lock-up restricting their
sale or other transfer, such that 50% of such shares will become freely tradable (subject to applicable securities laws) after 30 days
and the remaining 50% of such shares will become freely tradable (subject to applicable securities laws) after 90 days. If PSAM does not
sell units or public shares or redeem public shares such that it holds a lesser number of public shares than 9.9% of the number of units
sold in our Initial Public Offering and complies with the post-business combination lock-ups, then our sponsor will thereafter extend
to PSAM a right of first refusal to participate on substantially similar terms in our sponsor’s next special purpose acquisition
company (if any) and, if PSAM similarly invests and holds in any such second special purpose acquisition company, then our sponsor will
extend to PSAM a right of first refusal to participate on substantially similar terms in our sponsor’s next special purpose acquisition
company thereafter (if any). Notwithstanding the foregoing, pursuant to a letter agreement with PSAM dated December 30, 2021, the Company
has agreed with PSAM that if the Company completes a business combination identified by Foresight Consulting Group LLC, which has been
engaged by the Sponsor to provide certain consulting services for the Sponsor, the anchor investor’s lock-up restrictions with respect
to the anchor investor’s shares of the Company shall be waived.
PSAM has not been granted
any additional stockholder or other rights, and through its membership interests in our sponsor will have no right to control our sponsor
or vote or dispose of any founder shares (which will continue to be held and voted by our sponsor until after our initial business combination).
In addition, PSAM is not required to vote any of its public shares in favor of our initial business combination or for or against any
other matter presented for a stockholder vote. Nevertheless, purchases by PSAM of units in our Initial Public Offering, or of our securities
in the open market after the completion of our Initial Public Offering, or both, could potentially allow PSAM to control a sufficient
number of public shares to influence the conduct of our business, including with respect to a business combination. No assurance can be
given as to the amount of securities PSAM may retain or purchase in the open market following our Initial Public Offering.
NOTE 6 — COMMITMENTS AND
CONTINGENCIES
Registration Rights
Pursuant to a registration
rights agreement entered into on January 28, 2021, the holders of the Founder Shares, Private Placement Warrants and 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 and upon conversion of the Founder Shares) will have registration
rights to require the Company to register a sale of any of the securities held by them. The holders of these securities will be entitled
to make up to three demands, excluding short form registration demands, that the Company register such securities for sale under the Securities
Act. In addition, these holders will have “piggy-back” registration rights to include their securities in other registration
statements filed by the Company, subject to certain limitations. The registration rights agreement does not contain liquidated damages
or other cash settlement provisions resulting from delays in registering our securities. The Company will bear the expenses incurred in
connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters are entitled
to a deferred fee of $0.35 per Unit, or $8,050,000 in the aggregate. The deferred fee will become payable to the underwriters 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.
If the Proposals are approved,
and because the Company will not be able to complete an initial Business Combination by the Amended Termination Date, the deferred underwriting
commission will be included in the distribution of the proceeds held in the Trust Account made to the Public Stockholders upon liquidation
in accordance with the terms of the underwriting agreement entered into in connection with the Initial Public Offering. In connection
with the liquidation, the underwriters will forfeit any rights or claims to the deferred underwriting commission.
NOTE 7 — STOCKHOLDERS’
DEFICIT
Preferred Stock—
The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights
and preferences as may be determined from time to time by the Company’s board of directors. At September 30, 2022 and December 31,
2021, there were no shares of preferred stock issued or outstanding.
Class A Common
Stock— The Company is authorized to issue 300,000,000 shares of Class A common stock with a par value of $0.0001 per share.
Holders of Class A common stock are entitled to one vote for each share. At September 30, 2022 and December 31, 2021, there were 23,000,000
shares of Class A common stock issued and outstanding subject to possible redemption which are presented as temporary equity.
Class B Common
Stock— The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001 per share.
At September 30, 2022 and December 31, 2021, there were 5,750,000 shares of Class B common stock issued and outstanding.
Holders of Class A common
stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of our stockholders
except as otherwise required by law.
The shares of Class B common
stock will automatically convert into Class A common stock at the time of a Business Combination, or earlier at the option of the holder,
on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock or equity-linked securities
are issued or deemed issued in connection with a 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 sum of the total number of all shares of common
stock outstanding upon the completion of the Initial Public Offering, plus 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 a Business Combination, excluding any shares of Class A common stock or equity-linked
securities exercisable for or convertible into shares of Class A common stock issued, or to be issued, to any seller in the a Business
Combination and any private placement-equivalent 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.
NOTE 8 — WARRANT LIABILITIES
As of September 30, 2022
and December 31, 2021, there were 7,666,667 Public Warrants outstanding. Public Warrants may only be exercised for a whole number of shares.
No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become
exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Initial
Public Offering. The Public Warrants will expire five years after the completion of a Business Combination 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 covering the issuance of 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 its obligations
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.
The Company has agreed that
as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, it will use its best
efforts to file with the SEC a registration statement registering the issuance of the shares of Class A common stock issuable upon exercise
of the warrants, to cause such registration statement to become effective and to maintain a current prospectus relating to those shares
of Class A common stock until the warrants expire or are redeemed, as specified in 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 60th business day after the
closing of a Business Combination or within a specified period following the consummation of a Business Combination, warrant holders may,
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” pursuant to the exemption provided by Section 3(a)(9)
of the Securities Act; provided that such exemption is available. If that exemption, or another exemption, is not available, holders will
not be able to exercise their warrants on a cashless basis.
Redemption of Warrants
When the Price per share of Class A common stock Equals or Exceeds $18.00 — Once the warrants become exercisable, the Company
may redeem the outstanding Public Warrants:
| ● | in
whole and not in part; |
| ● | upon
a minimum of 30 days’ prior written notice of redemption to each warrant holder; and |
| ● | if,
and only if, the closing price of the Class A common stock equals or exceeds $18.00 per share (as adjusted) on the trading day prior
to the date on which the Company sends the notice of redemption to the warrant holders. |
If and when the warrants
become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying
securities for sale under all applicable state securities laws.
Redemption of Warrants
When the Price per share of Class A common stock Equals or Exceeds $10.00 —Once the warrants become exercisable, the Company
may redeem the outstanding warrants:
| ● | in
whole and not in part, and only if the Private Placement Warrants are simultaneously redeemed; |
| ● | at
a price of $0.01 per warrant; |
| ● | at
$0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption, provided that holders will be able to exercise
their warrants on a cashless basis prior to redemption and receive that number of shares based on the redemption date and the “fair
market value” of the shares of Class A common stock; |
| ● | if,
and only if, the closing price of the Class A common stock equals or exceeds $10.00 per public share (as adjusted) on the trading
day prior to the date on which the Company sends the notice of redemption to the warrant holders. |
The exercise price and number
of Class A common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event
of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described
below, the Public Warrants will not be adjusted for issuances of Class A common stock at a price below its exercise price. Additionally,
in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination
within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive
any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside
of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
In addition, if (x) the
Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the
closing of 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 Sponsor or its affiliates, without taking into account any Founder Shares held by the 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 such initial Business Combination (net of redemptions), and (z) the volume
weighted average trading price of the Company’s common stock during the 20 trading day period starting on the trading day prior
to the day on which the Company consummates its 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 and the $10.00 per share redemption trigger price described
above will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
As of September 30, 2022
and December 31, 2021, there were 4,733,333 Private Placement Warrants outstanding. The Private Placement Warrants are identical to the
Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A common
stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or saleable until 30 days after
the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be
exercisable on a cashless basis and be non-redeemable, except as described above, so long as they are held by the initial purchasers or
their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted
transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the
Public Warrants.
NOTE 9 — FAIR VALUE MEASUREMENTS
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: |
Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
|
|
|
|
Level 2: |
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
|
|
|
|
Level 3: |
Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
At September 30, 2022 and
December 31, 2021, assets held in the Trust Account was comprised of $230,975,701 and $230,034,876 in money market funds invested in U.S.
Treasury securities, respectively. During the periods ended September 30, 2022 and December 31, 2021, the Company withdrew $320,800 and
$0 interest income from the Trust Account, respectively.
The following table presents
information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2022
and December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
| |
Level | | |
September 30,
2022 | | |
Level | | |
December 31,
2021 | |
Assets: | |
| | |
| | |
| | |
| |
Investments
held in Trust Account | |
| 1 | | |
$ | 230,975,701 | | |
| 1 | | |
$ | 230,034,876 | |
| |
| | | |
| | | |
| | | |
| | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Warrant
Liabilities – Public Warrants | |
| 1 | | |
$ | 268,333 | | |
| 1 | | |
$ | 4,983,334 | |
Warrant
Liabilities – Private Placement Warrants | |
| 2 | | |
$ | 165,667 | | |
| 3 | | |
$ | 3,124,000 | |
The Warrants were accounted
for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on our accompanying September 30, 2022 and
December 31, 2021 condensed 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 condensed statements of operations.
The Public Warrants were initially
valued using a Monte Carlo simulation approach. For periods subsequent to the detachment of the warrants from the Units, the closing trading
price for the public warrants was used as the fair value of the Public Warrants.
For periods prior to September
30, 2022, the Private Placement Warrants were valued using a Black Scholes Option Pricing Model, which is considered to be a Level 3 fair
value measurement. The Modified Black Scholes model’s primary unobservable input utilized in determining the fair value of the Private
Placement Warrants is the expected volatility of the common stock. The expected volatility as of the Initial Public Offering date was
derived from observable public warrant pricing on comparable ‘blank-check’ companies without an identified target. For September
30, 2022, the fair value of the Private Placement Warrants is measured based on the listed market price of the public warrants.
The key inputs into the valuation
models for the Private Placement Warrants were as follows:
Input | |
December 31, 2021 | |
Market price | |
$ | 9.74 | |
Risk-free interest rate | |
| 1.33 | % |
Dividend yield | |
| 0.00 | % |
Effective volatility | |
| 11.00 | % |
Exercise price | |
$ | 11.50 | |
Time to expiration | |
| 5.67 | |
The following table presents
the changes in the fair value of warrant liabilities using Level 3 fair value measurements:
| |
Private Placement Warrants | | |
Public Warrants | | |
Warrant Liabilities | |
Fair value as of December 31, 2021 | |
$ | 3,124,000 | | |
$ | — | | |
$ | 3,124,000 | |
Change in fair value | |
| (1,940,667 | ) | |
| — | | |
| (1,940,667 | ) |
Fair value as of March 31, 2022 | |
$ | 1,183,333 | | |
$ | — | | |
$ | 1,183,333 | |
Change in fair value | |
| (615,333 | ) | |
| — | | |
| (615,333 | ) |
Fair value as of June 30, 2022 | |
$ | 568,000 | | |
$ | — | | |
$ | 568,000 | |
Change in fair value | |
| (402,333 | ) | |
| — | | |
| (402,333 | ) |
Transfer to Level 2 | |
| (165,667 | ) | |
| — | | |
| (165,667 | ) |
Fair value as of September 30, 2022 | |
$ | — | | |
$ | — | | |
$ | — | |
| |
Private Placement Warrants | | |
Public Warrants | | |
Warrant Liabilities | |
Fair value as of January 1, 2021 | |
$ | — | | |
$ | — | | |
$ | — | |
Initial measurement on February 2, 2021 | |
| 5,396,000 | | |
| 8,433,334 | | |
| 13,829,334 | |
Change in valuation inputs or other assumptions | |
| (1,893,334 | ) | |
| (2,913,334 | ) | |
| (4,806,668 | ) |
Transfer to Level 1 | |
| — | | |
| (5,520,000 | ) | |
| (5,520,000 | ) |
Fair value as of March 31, 2021 | |
$ | 3,502,666 | | |
| — | | |
| 3,502,666 | |
Change in fair value | |
| 804,667 | | |
| — | | |
| 804,667 | |
Fair value as of June 30, 2021 | |
$ | 4,307,333 | | |
| — | | |
| 4,307,333 | |
Change in fair value | |
| (1,278,000 | ) | |
| — | | |
| (1,278,000 | ) |
Fair value as of September 30, 2021 | |
$ | 3,029,333 | | |
$ | — | | |
$ | 3,029,333 | |
Transfers to/from Levels
1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs. The estimated
fair value of the public warrants transferring from a Level 3 measurement to a Level 1 fair value measurement during the year ended December
31, 2021 was approximately $5.5 million. The Private Warrants transferred from Level 3 to Level 2 measurement during the three and nine
months ended September 30, 2022.
NOTE 10 — SUBSEQUENT EVENTS
The Company evaluated subsequent
events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements were
issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in
the unaudited condensed financial statements that have not otherwise been disclosed in the notes to the unaudited condensed financial
statements above.