UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-40183
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
(Address of principal executive offices) |
(Zip Code) | |
(212 ) 292-7870
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
one-third of one redeemable warrant |
||||
/A |
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 Yes ☒ No ☐
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2
of the Exchange Act. | Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer |
☒ | Smaller reporting company | ||||
| Emerging growth company | ||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule ☒ No ☐
12b-2
of the Exchange Act). Yes As of May 23,817,701 shares of Class A common stock, $0.0001 par value, and 5,954,425 shares of Class B common stock, $0.0001 par value, issued and outstanding.
13
, 2022, there were SANDBRIDGE X2 CORP
QUARTERLY REPORT ON FORM
10-Q
TABLE OF CONTENTS
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PART
I-FINANCIAL
INFORMATION Item 1. Financial Statements.
SANDBRIDGE X2 CORP
CONDENSED BALANCE SHEETS
March 31, 2022 (Unaudited) |
December 31, 2021 |
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| ASSETS |
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| Current Assets |
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| Cash |
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| Prepaid expenses and other current assets |
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| Total Current Assets |
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| Investments held in Trust account |
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| Total Assets |
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| LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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| Current Liabilities |
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| Accrued expenses |
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| Accrued offering costs |
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| Total Current Liabilities |
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| Warrant liability |
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| Deferred underwriting fee payable |
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| Total Liabilities |
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| Commitments and Contingencies |
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| Class A common stock, $ |
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| Stockholders’ Deficit |
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| Preferred stock, $ |
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| Class A common stock, $ March 31, 2022 and December 31, 2021 |
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| Class B common stock, $ |
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| Additional paid in capital |
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| Accumulated deficit |
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| Total Stockholders’ Deficit |
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| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT |
$ |
$ |
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The accompanying notes are an integral part of the unaudited condensed financial statements.
1
SANDBRIDGE X2 CORP
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three months ended March 31, 2022 |
For the period from January 15, 2021 (Inception) through March 31, 2021 |
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| General and administrative expenses |
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| Loss from operations |
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| Other income (expense): |
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| Dividend earned on investments held in Trust A ccount |
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| Transaction costs related to issuance of warrants |
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| Change in fair value of warrants liability |
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| Interest earned on marketable securities held in Trust Account |
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| Other income, net |
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| Income before |
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| Provision for income taxes |
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| Net income |
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| Weighted average shares outstanding of Class A common stock |
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| Basic and diluted net income per common share, Class A common stock |
$ |
$ |
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| Weighted average shares outstanding of Class B common stock |
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| Basic and diluted net income per common share, Class B common stock |
$ |
$ |
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The accompanying notes are an integral part of the unaudited condensed financial statements.
2
SANDBRIDGE X2 CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2022
Changes in Stockholders’ Deficit |
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Class A Common Stock |
Class B Common Stock |
Additional paid-in capital |
Accumulated deficit |
Total Stockholders’ deficit |
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| Balance, January 1, 2022 |
$ | $ | $ |
$ | ( |
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$ | ( |
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| Net income |
— |
— |
— | — | — | |||||||||||||||||||||||
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| Balance, March 31, 2022 (unaudited) |
$ |
$ |
$ |
$ |
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FOR THE PERIOD FROM
JANUARY 15, 2021 (INCEPTION) THROUGH MARCH 31, 2021
Changes in Stockholders’ Deficit |
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Class A Common Stock |
Class B Common Stock |
Additional paid-in capital |
Accumulated deficit |
Total Stockholders’ deficit |
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| Balance, January 15, 2021 (inception) |
$ |
$ |
$ |
$ |
$ |
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| Issuance of Class B common stock to Sponsor |
— |
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| Excess consideration received for purchase of Private Placement warrants by Sponsor |
— |
— |
— | — | — | |||||||||||||||||||||||
| Forfeiture of Founder Shares |
— |
— |
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| Accretion of Class A common stock to redemption amount |
— |
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| Net income |
— |
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— | — | — | |||||||||||||||||||||||
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| Balance, March 31, 2021 (unaudited) |
$ |
$ |
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The accompanying notes are an integral part of the unaudited condensed financial statements.
3
SANDBRIDGE X2 CORP
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31, 2022 |
Period from January 15, 2021 (Inception) to March 31, 2021 |
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| Cash Flows from Operating Activities: |
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| Net income |
$ | $ | ||||||
| Adjustments to reconcile net income to net cash used in operating activities: |
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| Interest earned on investments held in Trust Account |
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| Dividend earned on investments held in Trust Account |
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| Transaction costs related to issuance of warrants |
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| Change in fair value of warrant liability |
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| Changes in operating assets and liabilities: |
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| Prepaid expenses and other current assets |
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| Accrued expenses |
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| Net cash used in operating activities |
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| Cash Flows from Investing Activities: |
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| Investment of cash into Trust Account |
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| Net cash used in investing activities |
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| Cash Flows from Financing Activities: |
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| Proceeds from issuance of Class B common stock to Sponsor |
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| Proceeds from sale of Units, net of underwriting discounts paid |
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| Proceeds from sale of Private Placements Warrants |
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| Proceeds from promissory note - related party |
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| Repayment of promissory note - related party |
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| Payment of offering costs |
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| Net cash provided by financing activities |
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| Net Change in Cash |
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| Cash - End of period |
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| Non-Cash investing and financing activities: |
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| Deferred underwriting fees |
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| Offering costs included in accrued expenses |
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The accompanying notes are an integral part of the unaudited condensed financial statements.
4
SANDBRIDGE X2 CORP
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Sandbridge X2 Corp (the “Company”) was incorporated in Delaware on January 15, 2021. The Company was formed for the purpose of entering into 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 March 31, 2022, the Company had not commenced any operations. All activity from inception through March 31, 2022 relates to the Company’s formation, and the initial public offering (“Initial Public Offering”), which is described below and, subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of a 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 March 9, 2021. On March 12, 2021, the Company completed the Initial Public Offering of 23,817,701 units (the “Units” and, with respect to the shares of Class A common stock included in the Units sold, the “Public Shares”), which includes the partial exercise by the underwriters of their over-allotment option in the amount of 1,817,701 Units, at $10.00 per Unit, generating gross proceeds of $238,177,010 , which is described in Note 3.
Simultaneously with the closing of the Initial Public Offering, the Company completed the sale of 4,509,027 warrants (the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant in a private placement to Sandbridge X2 Holdings LLC (the “Sponsor”), generating gross proceeds of $6,763,540 , which is described in Note 4.
Following the closing of the Initial Public Offering on March 12, 2021, an amount of $238,177,010 ($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. The funds in the Trust Account will be invested in U.S. government securities or exchange traded funds, 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 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. Transaction costs for the Initial Public Offering amounted to $13,341,815 , consisting of $4,367,540 in cash underwriting fees, $8,336,195 of deferred underwriting fees and $638,080 of other offering costs.
Substantially all of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants are intended to be applied generally toward consummating a Business Combination, and the Company’s management has broad discretion to identify targets for such a potential Business Combination and over the specific application of the funds held in the Trust Account if and when such funds are properly released from the Trust Account. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete a Business Combination with one or more operating businesses or assets that together have an aggregate fair market value equal to at least 80 % of the net assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the income earned on the Trust Account) at the time of the Company’s signing a definitive agreement in connection with its initial Business Combination. 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 an interest in the target business or assets sufficient for it not to be required to register as an investment company under the Investment Company Act. In addition, the Company has agreed not to enter into a definitive agreement regarding an initial Business Combination without the prior consent of the Sponsor and a private fund affiliated with Pacific Investment Management Company LLC (the “PIMCO private fund”), which private fund is a member of the Sponsor.
5
The Company will provide its 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 $10.00 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). 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 either prior to or upon such consummation of a Business Combination 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 rules 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 “Amended and Restated 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 rules, 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 4), 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 irrespective of whether they vote for or against the proposed transaction or do not vote at all.
Notwithstanding the above, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Amended and Restated Certificate of Incorporation provides 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15 % or more of the Public Shares, without the prior consent of the Company.
The Sponsor has agreed (a) to waive its redemption rights with respect to its Public Shares held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the Company’s initial Business Combination or to redeem 100 % of its Public Shares if the Company does not complete a Business Combination or (ii) with respect to any other provision relating to stockholders’ rights or
pre-initial
business combination activity, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment. The Company will have until March 12, 2023, or such later date as a result of stockholder vote to amend the Amended and Restated Certificate of Incorporation, to complete a Business Combination (the “Combination Period”). If the Company is unable to complete a Business Combination within the Combination Period or such longer period as may be approved by its stockholders, 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 100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish the 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.
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 tax obligations (less up to $6
The Sponsor has agreed to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. 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 underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00 ).
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 written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (1) $10.00 per Public Share and (2) 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. This liability will not apply with respect to claims by a third party who executed a waiver of any and all rights to the 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 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.
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 SEC on March 30, 2022. The interim results for the three months ended March 31, 2022 and for the period from January 15, 2021 (inception) through March 31, 2021, 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. 7
Liquidity and Going Concern
As of March 31, 2022, the Company had approximately $172,000 in its operating bank account, working capital deficit of approximately $933,000 and investments held in the Trust Account of approximately $238 .0 million. Interest income on the balance in the Trust Account may be used to pay the Company’s franchise and income tax obligations. Management intends to use substantially all of the funds held in the Trust Account to complete a business combination and to pay the Company’s expenses relating thereto, with any remainder used to fund the combined company’s working capital and for general corporate purposes post-closing.
The Company’s operations following the closing of the Initial Public Offering have been funded by the portion of the proceeds from the sale of Private Placement Warrants not held in the Trust Account. The Company may raise additional capital through loans or additional investments from the Sponsor or the Sponsor’s members. The Sponsor is not obligated to loan the Company additional funds or make additional investments, but may do so from time to time to meet the Company’s working capital needs. Management has determined that if the Company is unable to complete a Business Combination during the Combination Period (as defined in Note 1), then the Company will cease all operations except for the purpose of liquidating. In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standards Codification (“ASC”)
205-40
“Going Concern,” as of March 31, 2022, management has determined that the working capital deficit and date for mandatory liquidation raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance of this report. The Company intends to complete its initial business combination before the mandatory liquidation date; however, there can be no assurance that the Company will be able to consummate any business combination by March 12, 2023. These unaudited condensed financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as going concern. Use of Estimates
The preparation of the condensed financial statements in conformity with GAAP requires the Company’s management to make estimates unaudited and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future events. One of the more significant accounting estimates included in these unaudited condensed financial statements is the determination of the fair value of the warrant liability. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates.
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 no
Investments Held in Trust Account
The Company’s portfolio of investments held in the Trust Account
includes
investments in money market funds that invest in U.S. government securities. The Company records investments in money market funds that invest in U.S. government securities at fair value which is determined using available market information. Offering Costs
Offering costs consist of legal, accounting and underwriting fees and other costs incurred through the condensed balance sheet date that are directly related to the Initial Public Offering. Offering costs amounting to $
allocated to the issuance of warrants were expensed and included in the unaudited condensed statements of operations.
8
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption 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. The Company recognizes changes in redemption value immediately as they occur and will adjust the carrying value of the security to equal the redemption value at the end of each reporting period, if necessary. Increases or decreases in the carrying value of redeemable shares are affected by charges against retained earnings or, in the absence of retained earnings, by charges against additional 23,817,701
paid-in
capital. Accordingly, at March 31, 2022 and December 31, 2021,
all At March 31, 2022 and December 31, 2021, the Class A common stock reflected in the condensed balance sheets are reconciled in the following table:
| Gross proceeds |
$ | |||
| Less: |
||||
| Allocation to Public Warrants |
( |
) | ||
| Class A common stock issuance costs |
( |
) | ||
| Add: |
||||
| Accretion of carrying value to redemption value |
||||
| |
|
|
|
|
| Class A common stock subject to possible redemption |
$ | |||
| |
|
|
|
|
Warrant Liability
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives and Hedging”. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own shares of common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional
paid-in
capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash
gain or loss on the condensed statement of operations. The initial fair value of the warrants was estimated using the binomial lattice method (see Note 9). Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement’s carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. As of March 31, 2022, the Company had a deferred tax asset of approximately $45,000 , which had a full valuation allowance recorded against it of approximately $45 ,000. As of December 31, 2021, the Company had a deferred tax asset of approximately $43,000 , which had a full valuation allowance recorded against it of approximately $43 ,000.
The Company’s current taxable income primarily consists of interest earned on the Trust Account. The Company’s general and administrative costs are generally considered no 0
start-up
costs and are not currently deductible. During the three months ended March 31, 2022 and for the period from January 15, 2021 (inception) through March 31, 2021, the Company recorded start-up
costs (discussed above), which are not currently deductible. 9
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions 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. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no no
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 is subject to income tax examinations by major taxing authorities since inception. Net Income (Loss) per Common Share
The Company applies the 12,448,261 shares of Class A common stock in the aggregate.
two-class
method in calculating earnings per share. The contractual formula utilized to calculate the redemption amount approximates fair value. The Class feature to redeem at fair value means that there is effectively only one class of stock. Changes in fair value are not considered a dividend for the purposes of the numerator in the earnings per share calculation. Net loss per ordinary share is computed by dividing the pro rata net loss between the Class A common stock and the Class B common stock by the weighted average number of shares of common stock outstanding for each of the periods. The calculation of diluted loss per ordinary share does not consider the effect of the warrants issued in connection with the IPO since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. The warrants are exercisable for The following table reflects the calculation of basic and diluted net income (loss) per common share (in dollars, except per share amounts):
Three Months Ended |
For the period from January 15, 2021 (inception) through |
|||||||||||||||
March 31, 2022 |
March 31, 2021 |
|||||||||||||||
Class A |
Class B |
Class A |
Class B |
|||||||||||||
| Basic and diluted net income per share of common stock |
||||||||||||||||
| Numerator: |
||||||||||||||||
| Allocation of net income |
$ | $ | $ | $ | ||||||||||||
| Denominator: |
||||||||||||||||
| Basic and diluted weighted average shares outstanding |
||||||||||||||||
| Basic and diluted net income per share of common stock |
$ | $ | $ | $ | ||||||||||||
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 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.
Deposit
Insurance Corporation coverage limit of $Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature, except for the derivative assets and liabilities.
10
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standard Update (“ASU”)
No. 2020-06,
“Debt-Debt with Conversion and Other Options (Subtopic 470-20)
and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”),
which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06
also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception and simplifies the diluted earnings per share calculation in certain areas. The Company adopted the ASU on January 1, 2022. Adoption of the ASU 2020-06
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 standards updates, if currently adopted, would have a material effect on the accompanying condensed financial statements.
11
NOTE 3. PUBLIC OFFERING
The Company sold 23,817,701 Units in the Initial Public Offering, which included the partial exercise by the underwriters of their over-allotment option in the amount of 1,817,701 Units, at a purchase price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and . 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 7).
one-third
of one redeemable warrant (“Public Warrant”)NOTE 4. RELATED PARTY TRANSACTIONS
Founder Shares
On January 25, 2021, the Sponsor purchased 5,750,000 shares of the Company’s Class B common stock (the “Founder Shares”) for an aggregate purchase price of $25,000 , which the Company used to cover certain offering costs. In February 2021, the Sponsor transferred 40,000 shares to independent director Ramez Toubassy, 40,000 shares to independent director Domenico De Sole, and 30,000 shares to an advisor, Tommy Hilfiger. In March 2021, the Sponsor transferred 25,000 shares to independent director Cynthia Isgrig. In March 2021, the Company effected an 11 :10 stock split resulting in an aggregate of 6,325,000 Founder Shares. The Founder Shares included an aggregate of up to 825,000 shares subject to forfeiture by the Sponsor to the extent that the underwriters’ over-allotment was exercised, so that the number of Founder Shares would equal, on an 20 % of the Company’s issued and outstanding shares after the Initial Public Offering. In connection with the underwriters’ partial exercise of the over-allotment option and the forfeiture of the remaining over-allotment option, 370,575 Founder Shares were forfeited and 454,425 Founder Shares are no longer subject to forfeiture resulting in an aggregate of 5,954,425 Founder Shares outstanding.
as-converted
basis, approximately The Sponsor has agreed, subject to certain limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier 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 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, stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of Class A common stock for cash, securities or other property.
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 4,509,027 Private Placement Warrants at a price of $1.50 per Private Placement Warrant, for an aggregate purchase price of $6,763,540 . Of the private placement proceeds received, $3,832,672 of proceeds were recorded as the private placement warrant liability and $2,930,868 represents consideration received by the Sponsor in excess of the warrants’ fair value. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at an exercise price of $11.50 per share, subject to adjustment (see Note 7). A portion of the proceeds from the Private Placement Warrants were added to the 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.
Administrative Support Agreement
The Company entered into an agreement, commencing on March 9, 2021, to pay an affiliate of the Sponsor $10,000 per month for office space, utilities and secretarial and administrative support services. Upon the earlier of the completion of a Business Combination and its liquidation, the Company will cease paying these monthly fees. For the three months ended March 31, 2022 and for the period from January 15, 2021 (inception) through March 31, 2021, the Company incurred $30,000 and $10,000 , respectively, in fees for these services, $20,000 and $10,000 of which is included in accounts payable and accrued expenses as of March 31, 2022 and December 31, 2021, respectively, in the accompanying condensed balance sheet.
Promissory Note—Related Party
On January 25, 2021, the Sponsor issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to which the Company borrowed an aggregate principal amount of $250,000 . The Promissory Note was no n-interest bearing and payable on the earlier of (i) June 30, 2021 or (ii) the consummation of the Initial Public Offering. The Company repaid all amounts due under the promissory note on March 15, 2021. The Promissory Note is no longer available to the Company.
12
Related Party Loans
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor, or certain of the Company’s officers and directors or their affiliates 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. 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 converted into warrants, at a price of $1.50 per warrant, of the post Business Combination entity. The warrants would be identical to the Private Placement Warrants. As of March 31, 2022 and December 31, 2021, no
See Note 9 Subsequent Events.
NOTE 5. COMMITMENTS AND CONTINGENCIES
Risks and Uncertainties
Management continues to evaluate the impact of the
COVID-19
pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these condensed financial statements were issued. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty. Registration and Stockholder Rights
Pursuant to a registration and stockholder rights agreement entered into on March 9, 2021, the holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) and certain security holders holding Public Shares, whether purchased in the Initial Public Offering or thereafter in the open market, are entitled to registration rights, requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to shares of Class A common stock). Any holder of at least 20 % of the outstanding registrable securities owned by these holders will be entitled to make up to two demands, excluding short-form demands, that the Company register such securities. In addition, the holders will have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration and stockholder rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable
lock-up
period. The Company will bear certain expenses incurred in connection with the filing of any such registration statements. In addition, pursuant to the registration and stockholder rights agreement, upon consummation of a Business Combination, the Sponsor and the future holders of Founder Shares (or securities into which the Founder Shares convert) held by the Sponsor shall be entitled to designate three individuals for nomination for election to the Company’s board of directors for so long as they continue to hold, collectively, at least 50% of the Founder Shares (or the securities into which such Founder Shares convert) held by such persons on the date of the final prospectus for the Initial Public Offering. Thereafter, such initial stockholders will be entitled to designate (i) two individuals for nomination for election to the Company’s board of directors for so long as they continue to hold, collectively, at least 30 % of the Founder Shares (or the securities into which such Founder Shares convert) held by such persons on the closing of the Initial Public Offering and (ii) one individual for nomination for election to the Company’s board of directors for so long they continue to hold, collectively, at least 20 % of the Founder Shares (or the securities into which such Founder Shares convert) held by such persons on the date of the final prospectus for the Initial Public Offering.
Underwriting Agreement
On March 12, 2021, the underwriters elected to partially exercise their over-allotment option to purchase an additional 1,817,701 Units.
Certain of the
underwriters of the Initial Public Offering
are entitled to a deferred fee of $0.35 per unit, or $
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. The underwriters did not receive any upfront underwriting discount or commissions on the 13
NOTE 6. STOCKHOLDERS’ DEFICIT
Preferred Stock
-
and December 31, 2021,
there were Class
A Common Stock
and December 31, 2021,
there were Class
B Common Stock
and December 31, 2021,
there were Holders of Class A common stock and Class B common stock will vote together as a single class on all matters submitted to a vote of stockholders except as required by law.
The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of a Business Combination on a 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 excess of the amounts offered in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an 20 % of the sum of the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with a Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in a Business Combination, and any private placement-equivalent warrants issued to the Sponsor or its affiliates upon conversion of loans made to the Company).
one-for-one
as-converted
basis, NOTE 7. WARRANTS
As of March 31, 2022 and December 31, 2021, there were 7,939,234 30 days after the completion of a Business Combination. 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 with respect to the shares of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue any 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 within twenty (20 ) business days after the later of the first date on which the warrants are exercisable and the date on which the Company receives from any warrant holder a request for such registration, the Company will use its commercially reasonable efforts to file with the SEC a post-effective amendment to the registration statement or a new registration statement covering the shares of Class A common stock issuable upon exercise of the warrants. The Company will use its commercially reasonable efforts to cause such registration statement to become effective within 45 business days after the filing of such registration statement 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; provided that if shares of Class A common stock are at the time of any exercise of a Public 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, the Company will not be required to file or maintain in effect a registration statement, but the Company will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 45th business day after the filing of such registration statement, 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.
14
Redemption of warrants when the price per Class
A common stock equals or exceeds $18.00
| • | in whole and not in part; |
| • | at a price of $ |
| • | upon a minimum of |
| • | if, and only if, the last reported sale price of the Class A common stock for any |
If and when the Public Warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Redemption of warrants when the price per Class
A common stock equals or exceeds $10.00
| • | in whole and not in part; |
| • | at $ |
| • | if, and only if, the Reference Value equals or exceeds $ |
| • | if the Reference Value is less than $18.00 per share (as adjusted), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above. |
The exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of Class A common stock at a price below their exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per Class A common share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the 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 a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s Class A common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates a 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 prices 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 will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
As of March 31, 2022 and December 31, 2021, there were 4,509,027 30 days after the completion of a Business Combination, subject to certain limited exceptions.
15
Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be
non-redeemable
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. 16
NOTE
8
. 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 an assessment of the assumptions that market participants would use in pricing the asset or liability. | |
Transfers between fair value levels are recorded at
the end of
each reporting period. The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description |
Level |
March 31, 2022 |
Level |
December 31, 2021 |
||||||||||||
| Assets: |
||||||||||||||||
| Investments held in Trust Account—U.S. Treasury Bill-backed Money Market Funds |
1 | $ | 1 |
$ | ||||||||||||
| Liabilities: |
||||||||||||||||
| Warrant liability—Public warrants |
2 |
$ | 1 |
$ | ||||||||||||
| Warrant liability—Private Placement Warrants |
2 |
$ | 2 |
|
$ | |||||||||||
At March 31, 2022, assets held in the Trust Account were comprised of $238,190,583
in U.S. Treasury Bill-backed Money Market Funds. During the three months ended March 31, 2022 and March 31, 2021, the Company did not withdraw any interest income from the Trust Account.
Warrants—Subsequent Measurement
The Warrants are measured at fair value on a recurring basis. The subsequent measurement of the Public Warrants for each quarterly reporting period is classified as Level 1 when an observable market quote in an active market is available. When the Public Warrants do not trade in an active market on the measurement date , the Public Warrants are classified as Level 2. When an observable market quote in an active market is not available, a binomial lattice model is used to value the warrant liability, and the Public Warrants are classified as Level 3. The subsequent measurement of the Private Placement Warrants for each quarterly reporting period is classified as Level 2 when a quoted market price for a similar liability is available. When an observable market quote is not available, a binomial lattice model is used and the Private Placement Warrants are classified as Level 3.
The aforementioned warrant liabilities are not subject to qualified hedge accounting.
17
The following table provides quantitative information regarding Level 3 fair value measurements:
At March 31, 2021 |
||||
| Unit price |
$ | |||
| Strike price |
$ | |||
| Term (in years) |
||||
| Volatility |
% | |||
| Risk-free rate |
% | |||
| Dividend yield |
||||
The following table presents the changes in the fair value of warrant liability for the period from January 15, 2021 (Inception) to March 31, 2021:
Private Placement |
Public |
Warrant Liability |
||||||||||
| Fair value as of January 15, 2021 |
$ |
$ |
$ |
|||||||||
| Initial measurement on March 12, 2021 |
||||||||||||
| Change in fair value of warrant liability |
( |
) |
( |
) |
( |
) | ||||||
| |
|
|
|
|
|
|||||||
| Fair value as of March 31, 2021 |
$ |
$ |
$ |
|||||||||
| |
|
|
|
|
| |||||||
NOTE
9
. SUBSEQUENT EVENTS The Company evaluated subsequent events and transactions that occurred after the condensed balance sheet date up to the date that the unaudited condensed financial statements were issued. Based upon this review, except as discussed below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
On May 11, 2022, the Company issued a promissory note to its Sponsor permitting borrowings of up to $1,500,000 to provide the Company with working capital. The Company will receive an initial $500,000 under the promissory note, with additional
borrowings
available only at the discretion of the Sponsor and its members. The
note is no n-interest bearing, and is due upon consummation of a Business Combination. The Sponsor may opt to convert the note to warrants at $1.50 per warrant, after the completion of a Business Combination.
The terms of any such warrants issued will be identical to the terms of the Private Placement Warrants (see Note 7). If the Company does not complete a Business Combination, the note will not be repaid and all amounts owed under it will be forgiven except to the extent that the Company has funds available to it outside of its Trust Account
.
18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this quarterly report on Form
10-Q
(the “Quarterly Report”) to “we,” “us” or the “Company” refer to Sandbridge X2 Corp References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Sandbridge X2 Holdings LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form
10-K
for the year ended December 31, 2021, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 30, 2022. The Company’s SEC filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. Overview
We are a blank check company formed under the laws of the State of Delaware on January 15, 2021 formed for the purpose of entering into a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). We intend to effectuate our Business Combination using cash from the proceeds of our initial public offering (the “Initial Public Offering”) and the sale of the Private Placement Warrants (as defined below), our capital stock, debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities through March 31, 2022 were organizational activities, those necessary to prepare and consummate the Initial Public Offering, described below, and the search for a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We generate
non-operating
income in the form of interest and dividend income on marketable securities held in our trust account (the “Trust Account”). We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses. For the period from January 15, 2021 (inception) through March 31, 2021, we had a net income of $1,778,478 which consists of operating costs of $82,672, transaction costs allocated to warrant liability of $463,000, offset by a change in the fair value of our warrant liability of $2,240,687, interest income on investment held in the Trust Account.
For the three months ended March 31, 2022, we had net income of $1,022,480 which consists of operating costs of $224,312, offset by a change in the fair value of our warrant liability of $1,244,826 and dividend income of $1,966.
Liquidity and Capital Resources
Until the consummation of the Initial Public Offering, our only source of liquidity was an initial purchase of shares of our Class B common stock by the Sponsor and loans from our Sponsor.
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On March 12, 2021, we completed the Initial Public Offering of 23,817,701 Units, which included the partial exercise by the underwriters of their over-allotment option in the amount of 1,817,701 Units, at $10.00 per Unit, generating gross proceeds of $238,177,010. Simultaneously with the closing of the Initial Public Offering, we completed the sale of 4,509,027 Private Placement Warrants (the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant in a private placement to the Sponsor, generating gross proceeds of $6,763,540.
Following the Initial Public Offering, the partial exercise of the over-allotment option, and the sale of the Private Placement Warrants, a total of $238,177,010 was placed in the Trust Account. We incurred $13,341,815 in Initial Public Offering related costs, consisting of $4,367,540 in cash underwriting fees, $8,336,195 of deferred underwriting fees and $638,080 of other offering costs.
For the three months ended March 31, 2022, cash used in operating activities was $415,849. Net income of $1,022,480 was affected by dividends earned on marketable securities held in the Trust Account of $1,966 and change in the fair value of the warrant liability of $1,244,826. Changes in operating assets and liabilities used $191,537 of cash from operating activities. For the period from January 15, 2021 (inception) through March 31, 2021, cash used in operating activities was $704,350. Net income of $1,778,478 was affected by transaction costs allocated to warrant liability of $380,000, interest earned on marketable securities held in the Trust Account of $463, and change in the fair value of the warrant liability of $2,240,687. Changes in operating assets and liabilities used $621,678 of cash from operating activities.
As of March 31, 2022, we had marketable securities held in the Trust Account of $238,190,583 consisting of money market funds.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest and dividend income earned on the Trust Account (less income taxes payable), to complete our Business Combination. We may withdraw interest and dividend income to pay franchise and income taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of March 31, 2022, we had cash of $171,905 outside of the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor, or our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts. In the event that a Business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. 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. The terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. The loans would be repaid upon consummation of a Business Combination, without interest.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking
in-depth
due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our Public Shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our Business Combination. If we are unable to complete our Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations. Off-Balance
Sheet Arrangements We have no obligations, assets or liabilities that would be considered
off-balance
sheet arrangements as of March 31, 2022. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance
sheet arrangements. We have not entered into any off-balance
sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial
assets. 20
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement commencing on March 9, 2021, to pay an affiliate of the Sponsor $10,000 per month for office space, utilities and secretarial and administrative support services. Upon the earlier of the completion of a Business Combination and its liquidation, we will cease paying these monthly fees.
Certain of the underwriters of the Initial Public Offering are entitled to a deferred fee of $0.35 per share, or $8,336,195 in the aggregate, which reflects the underwriters’ partial exercise of their over-allotment option. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement. The underwriters did not receive any upfront underwriting discount or commissions on the 1,980,000 Units purchased by the members of our Sponsor that are affiliated with PIMCO, but will receive deferred underwriting commissions with respect to such Units.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the period reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption are classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our Class A common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ deficit section of our condensed balance sheet.
Net Income (Loss) Per Common Share
Net loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. We apply the
two-class
method in calculating earnings per share. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value. Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.
Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk
Not required for smaller reporting companies.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended March 31, 2022, as such term is defined in
Rules 13a-15(e)
and 15d-15(e)
under the Exchange Act. Based upon that evaluation, our certifying officers concluded that our disclosure controls and procedures were not effective as of March 31, 2022. Changes in Internal Control Over Financial Reporting
Other than the steps taken to remediate the material weakness identified in prior periods and further described below, there was no change in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Our principal executive officer and principal financial officer performed additional accounting and financial analyses and other post-closing procedures including consulting with subject matter experts related to the accounting for complex financial instruments. The Company’s management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation and improvement of our internal control over financial reporting. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we have expanded and will continue to improve these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards.
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PART
II-OTHER
INFORMATION Item 1. Legal Proceedings
None
Item 1A. Risk Factors
An investment in our securities involves a high degree of risk. For a detailed discussion of the risks that affect our business please refer to the section title “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 30, 2022 (the “2021 Form 10-K”). As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in the 2021 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On March 12, 2021, we consummated the Initial Public Offering of 23,817,701 Units, including 1,817,701 Units sold pursuant to the partial exercise of the underwriters’ option to purchase additional Units cover overallotments. The Units were sold at an offering price of $10.00 per unit, generating total gross proceeds of $238,177,010, before deduction underwriting discounts and commissions and offering expenses. Citigroup Global Markets, Inc. and Deutsche Bank Securities, Inc. (the “Underwriters’”) acted as representatives of the several underwriters of the Initial Public Offering. The securities in the offering were registered under the Securities Act on registration statements on Form
S-1
(File No. 333-253203)
and Form S-1MEF
(File No. 333-254069)
(together, the “Registration Statements”). The SEC declared the registration statements effective on March 9, 2021. Simultaneously with the consummation of the Initial Public Offering and the issuance and sale of the Units, the Company consummated the private placement of 4,509,027 warrants (the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant, generating gross proceeds of $6,763,540.50. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. The Private Placement Warrants, which were purchased by the Sponsor, are identical to the warrants underlying the Units sold in the Initial Public Offering, except that, if held by the Sponsor or its permitted transferees, they (i) may be exercised for cash or on a cashless basis, (ii) are not subject to being called for redemption under certain redemption scenarios (except in certain redemption scenarios when the price per share of Class A common stock equals or exceeds $10.00 (as adjusted)), (iii) subject to certain limited exceptions, will be subject to transfer restrictions until 30 days following the consummation of the Company’s initial business combination and (iv) will be entitled to registration rights. If the Private Placement Warrants are held by holders other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company under all redemption scenarios and exercisable by holders on the same basis as the Public Warrants. The Private Placement Warrants have been issued pursuant to, and are governed by, the Warrant Agreement.
The Private Warrants are identical to the warrants underlying the Units sold in the Initial Public Offering, except that the Private Warrants are not transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions.
Following the closing of the Initial Public Offering on March 12, 2021, an amount of $238,177,010 ($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 the Trust Account.
We paid a total of $13,341,815 in underwriting discounts and commissions, consisting of $4,367,540 in cash underwriting fees, $8,336,195 of deferred underwriting fees and $638,080 for other costs in connection with the Initial Public Offering.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Quarterly Report.
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
None
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Item 5. Other Information
None
Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report.
No. |
Description of Exhibit | |
| 31.1* | Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2* | Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1** | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2** | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS* | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB* | Inline XBRL Taxonomy Extension Labels Linkbase Document | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |
| * | Filed herewith. |
| ** | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SANDBRIDGE X2 CORP | ||||||
| Date: May 13, 2022 | By: | /s/ Ken Suslow | ||||
| Name: | Ken Suslow | |||||
| Title: | Chief Executive Officer | |||||
| (Principal Executive Officer) | ||||||
| Date: May 13, 2022 | By: | /s/ Richard Henry | ||||
| Name: | Richard Henry | |||||
| Title: | Chief Financial Officer | |||||
| (Principal Financial and Accounting Officer) | ||||||
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