References to the "Company," "our," "us" or "we" refer to Orion Acquisition
Corp. 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
report. Certain information contained in the discussion and analysis set forth
below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). We have based these forward-looking statements on our current
expectations and projections about future events. These forward-looking
statements are subject to known and unknown risks, uncertainties and assumptions
about us that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Such statements include, but are not limited
to, possible business combinations and the financing thereof, and related
matters, as well as all other statements other than statements of historical
fact included in this Form 10-Q. Factors that might cause or contribute to such
a discrepancy include, but are not limited to, those described in our other
Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated on November 25, 2020, as a Delaware
corporation and formed for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization, or similar business
combination with one or more businesses (the "Business Combination"). We are an
emerging growth company and, as such, we are subject to all of the risks
associated with emerging growth companies.
Our sponsor is Orion Healthcare Acquisition Partners, LLC, a Delaware limited
liability company (the "Sponsor"). Our registration statement for the initial
public offering (the "Initial Public Offering") was declared effective on March
1, 2021. On March 4, 2021, we consummated our Initial Public Offering of
41,400,000 units (the "Units" and, with respect to the Class A common stock
included in the Units being offered, the "Public Shares"), including 5,400,000
additional Units to cover over-allotments (the "Over-Allotment Units"), at
$10.00 per Unit, generating gross proceeds of $414.0 million, and incurring
offering costs of approximately $23.5 million, inclusive of approximately $14.5
million in deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 7,520,000 warrants (each, a
"Private Placement Warrant" and collectively, the "Private Placement Warrants")
at a price of $1.50 per Private Placement Warrant in a private placement to our
Sponsor, generating proceeds of $11.3 million.
Upon the closing of the Initial Public Offering and the Private Placement,
$414.0 million ($10.00 per Unit) of the net proceeds of the Initial Public
Offering and certain of the proceeds of the Private Placement was placed in a
trust account (the "Trust Account") located in the United States with
Continental Stock Transfer & Trust Company acting as trustee, and will be
invested only in U.S. government treasury bills with a maturity of 185 days or
less or in money market funds investing solely in U.S. Treasuries and meeting
certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), as determined by us, until the earlier
of: (i) the completion of a Business Combination and (ii) the distribution of
the Trust Account as described below.
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Our management has broad discretion with respect to the specific application of
the net proceeds of the Initial Public Offering and the sale of the 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 we will be able to complete a Business Combination successfully.
We must complete one or more initial Business Combinations having an aggregate
fair market value of at least 80% of the net assets held in the Trust Account
(net of amounts disbursed to management for working capital purposes, if
permitted, and excluding the amount of any deferred underwriting commissions) at
the time of the agreement to enter into the initial Business Combination.
However, we will only complete a Business Combination if the post-business
combination company owns or acquires 50% or more of the voting securities of the
target or otherwise acquires a controlling interest in the target sufficient for
it not to be required to register as an investment company under the Investment
Company Act.
If we are unable to complete a Business Combination within 24 months from the
closing of the Initial Public Offering, or March 4, 2023, or such amended date
as approved by our stockholders (the "Combination Period"), we will (i) cease
all operations except for the purposes of winding up; (ii) as promptly as
reasonably possible, but not more than ten business days thereafter, redeem the
Public Shares, 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 us to pay our
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), subject to applicable law;
and (iii) as promptly as reasonably possible following such redemption, subject
to the approval of the remaining stockholders and the 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.
The issuance of additional shares in connection with a Business Combination to
the owners of the target or other investors:
? may significantly dilute the equity interest of investors in the Initial
Public Offering, which dilution would increase if the anti-dilution
provisions in the Class B common stock resulted in the issuance of Class A
common stock on a greater than one-to-one basis upon conversion of the
Class B common stock;
? may subordinate the rights of holders of Class A common stock if shares of
preferred stock are issued with rights senior to those afforded our Class
A common stock;
? could cause a change in control if a substantial number of shares of our
Class A common stock are issued, which may affect, among other things, our
ability to use our net operating loss carry forwards, if any, and could
result in the resignation or removal of our present officers and
directors;
? may have the effect of delaying or preventing a change of control of us by
diluting the share ownership or voting rights of a person seeking to
obtain control of us; and
? may adversely affect prevailing market prices for our units, Class A
common stock and/or warrants.
Similarly, if we issue debt securities or otherwise incur significant debt to
bank or other lenders or the owners of a target, it could result in:
? default and foreclosure on our assets if our operating revenues after an
initial Business Combination are insufficient to repay our debt
obligations;
? acceleration of our obligations to repay the indebtedness even if we make
all principal and interest payments when due if we breach certain
covenants that require the maintenance of certain financial ratios or
reserves without a waiver or renegotiation of that covenant;
? our immediate payment of all principal and accrued interest, if any, if
the debt is payable on demand;
? our inability to obtain necessary additional financing if the debt
contains covenants restricting our ability to obtain such financing while
the debt is outstanding;
? our inability to pay dividends on our Class A common stock;
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? using a substantial portion of our cash flow to pay principal and interest
on our debt, which will reduce the funds available for dividends on our
Class A common stock if declared, expenses, capital expenditures,
acquisitions and other general corporate purposes;
? limitations on our flexibility in planning for and reacting to changes in
our business and in the industry in which we operate;
? increased vulnerability to adverse changes in general economic, industry
and competitive conditions and adverse changes in government regulation;
and
? limitations on our ability to borrow additional amounts for expenses,
capital expenditures, acquisitions, debt service requirements, execution
of our strategy and other purposes and other disadvantages compared to our
competitors who have less debt.
As indicated in the accompanying unaudited condensed financial statements, as of
September 30, 2022, we had approximately $483,000 in our operating bank account.
We cannot assure you that our plans to complete our initial Business Combination
will be successful.
Results of Operations
Our entire activity since November 25, 2020 (inception) through September 30,
2022 related to our formation, the preparation for the Initial Public Offering,
and since the closing of the Initial Public Offering, the search for a
prospective initial Business Combination. We have neither engaged in any
operations nor generated any revenues to date. We will not generate any
operating revenues until after completion of our initial Business Combination.
We generate non-operating income in the form of interest income on investments
held in the Trust Account.
For the three months ended September 30, 2022, we had net income of
approximately $2.1 million, which consisted of a gain of approximately $715,000
from changes in fair value of derivative warrant liabilities and approximately
$2.2 million from interest earned on investments held in the Trust Account,
partially offset by approximately $316,000 in general and administrative
expenses, $30,000 in general and administrative expenses due to a related party,
approximately $50,000 in franchise tax expenses and approximately $461,000 in
income tax expenses.
For the three months ended September 30, 2021, we had net income of
approximately $4.7 million, which consisted of a gain of approximately $5.5
million from changes in fair value of derivative warrant liabilities, offset by
approximately $5,000 in losses on investments held in the Trust Account,
approximately $792,000 in general and administrative expenses, and approximately
$51,000 in franchise tax expenses.
For the nine months ended September 30, 2022, we had net income of approximately
$11.8 million, which consisted of a gain of approximately $10.7 million from
changes in fair value of derivative warrant liabilities and approximately $2.9
million from interest earned on investments held in the Trust Account, partially
offset by approximately $1.0 million in general and administrative expenses,
$90,000 in general and administrative expenses due to a related party,
approximately $150,000 in franchise tax expenses and approximately $552,000 in
income tax expenses.
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For the nine months ended September 30, 2021, we had net income of approximately
$11.4 million, which consisted of approximately $14,000 in gain on investments
held in the Trust Account and a gain of approximately $13.5 million from changes
in fair value of derivative warrant liabilities, offset by approximately $1.2
million in general and administrative expenses, approximately $816,000 in
financing costs - derivative warrant liabilities and approximately $149,000 in
franchise tax expenses.
Due to the increase in income earned on the Trust Account we are no longer
projecting net operating losses. As a result, during the three and nine months
ended September 30, 2022, we had income tax expenses of approximately $461,000
and $552,000, respectively.
Liquidity and Going Concern
As of September 30, 2022, we had approximately $483,000 in our operating bank
account held outside the Trust Account, approximately $681,000 of investment
income held in the Trust Account to pay for our tax obligations (less up to
$100,000 of interest to pay dissolution expenses), and working capital deficit,
exclusive of tax liabilities, of approximately $518,000.
Our liquidity needs to date have been satisfied through a $25,000 contribution
from our Sponsor in exchange for the issuance of our founder shares to our
Sponsor, the promissory note (the "Note") of $136,000 from our Sponsor, and the
proceeds from the consummation of the Private Placement not held in the Trust
Account. On March 8, 2021, we repaid the Note in full to our Sponsor which
resulted in the Note no longer being available. In addition, in order to finance
transaction costs in connection with a Business Combination, our Sponsor or an
affiliate of our Sponsor, or certain of our officers and directors may, but are
not obligated to, provide the Company Working Capital Loans. As of September 30,
2022 and December 31, 2021, there were no Working Capital Loans outstanding.
In connection with our assessment of going concern considerations in accordance
with FASB ASC Topic 205-40, "Presentation of Financial Statements - Going
Concern," our management has determined that the working capital deficit and
mandatory liquidation date and subsequent dissolution raise substantial doubt
about our ability to continue as a going concern. If we are unable to complete a
Business Combination by March 4, 2023, then we will cease all operations except
for the purpose of liquidating. No adjustments have been made to the carrying
amounts of assets or liabilities should we be required to liquidate after March
4, 2023.
Management continues to evaluate the impact of the COVID-19 pandemic on the
industry and has concluded that while it is reasonably possible that the virus
could have a negative effect on the Company's financial position, results of its
operations and/or search for a target company, the specific impact is not
readily determinable as of the date of these unaudited condensed financial
statements. The unaudited condensed financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
On August 16, 2022, the Inflation Reduction Act of 2022 (the "IR Act") was
signed into federal law. The IR Act provides for, among other things, a new U.S.
federal 1% excise tax on certain repurchases of stock by publicly traded
domestic (i.e., U.S.) corporations and certain domestic subsidiaries of publicly
traded foreign (i.e., non-U.S.) corporations occurring on or after January 1,
2023. The excise tax is imposed on the repurchasing corporation itself, not its
shareholders from which shares are repurchased. The amount of the excise tax is
generally 1% of the fair market value of the shares repurchased at the time of
the repurchase. However, for purposes of calculating the excise tax,
repurchasing corporations are permitted to net the fair market value of certain
new stock issuances against the fair market value of stock repurchases during
the same taxable year. In addition, certain exceptions apply to the excise tax.
The U.S. Department of the Treasury (the "Treasury") has been given authority to
provide regulations and other guidance to carry out and prevent the abuse or
avoidance of the excise tax. Any repurchase by the Company of the Company's
stock that occurs after December 31, 2022, in connection with a Business
Combination, extension vote or otherwise, is generally expected to be subject to
the excise tax on a redemption of Class A common stock or other stock of the
Company. Whether and to what extent the Company would be subject to the excise
tax in connection with a Business Combination, extension vote or otherwise will
depend on a number of factors, including (i) whether the redemption is treated
as a repurchase of stock for purposes of the excise tax, (ii) the fair market
value of the redemption treated as a repurchase of stock in connection with the
Business Combination, extension or otherwise, (iii) the structure of a Business
Combination, (iv) the nature and amount of any "PIPE" or other equity issuances
in connection with a Business Combination (or otherwise issued not in connection
with a Business Combination but issued within the same taxable year of a
redemption treated as a repurchase of stock) and (iv) the content of regulations
and other guidance from the Treasury. As noted above, the excise tax would be
payable by the Company and not by the redeeming holder.
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The imposition of the excise tax could cause a reduction in the cash available
on hand to complete a Business Combination or for effecting redemptions in 2023
such that redeeming holders of Public Shares may receive a per-share redemption
amount that is lower than what they would otherwise be entitled to receive. As a
result, to allow Orion to return the proceeds of its Initial Public Offering to
its Public Stockholders earlier than currently contemplated under the Amended
and Restated Certificate of Incorporation and avoid the imposition of the excise
tax, on October 21, 2022, the Company filed a definitive proxy statement with
respect to a special meeting of stockholders to seek shareholder approval of
amendments to the Company's Amended and Restated Certificate of Incorporation to
(i) change the date by which the Company must consummate its initial Business
Combination from March 4, 2023 to December 1, 2022, (ii) remove the Redemption
Limitation (as defined in the Amended and Restated Certificate of Incorporation)
to allow the Company to redeem Public Shares notwithstanding the fact that such
redemption would result in the Company having net tangible assets of less than
$5,000,001, and (iii) allow the Company to remove up to $100,000 of interest
earned on the amount on deposit in the Trust Account prior to redeeming the
Public Shares in connection with the stockholder meeting in order to pay
dissolution expenses.
Related Party Transactions
Founder Shares
On December 9, 2020, our Sponsor paid an aggregate of $25,000 to cover certain
expenses and offering costs on behalf of us in exchange for issuance of
8,625,000 shares of our Class B common stock, par value $0.0001 per share (the
"Founder Shares"). On March 1, 2021, we effected a share capitalization of
1,725,000 shares of Class B common stock, resulting in an aggregate of
10,350,000 shares of Class B common stock issued and outstanding.
The Sponsor and the Company's officers and directors (the "Initial
Stockholders") 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 the initial Business Combination or (B) subsequent to the
initial Business Combination, (x) if the closing price of the Class A common
stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for any 20 trading
days within any 30-trading day period commencing at least 150 days after the
initial Business Combination, or (y) the date on which we complete a
liquidation, merger, capital stock exchange, reorganization or other similar
transaction that results in all of the stockholders having the right to exchange
their shares of common stock for cash, securities or other property.
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, we consummated
the Private Placement of 7,520,000 Private Placement Warrants at a price of
$1.50 per Private Placement Warrant to our Sponsor, generating proceeds of
approximately $11.3 million.
Each whole Private Placement Warrant is exercisable for one whole share of Class
A common stock at a price of $11.50 per share beginning on the later of (a) 30
days after the completion of a Business Combination or (b) 12 months from the
closing of the Initial Public Offering. A portion of the proceeds from the sale
of the Private Placement Warrants to our Sponsor was added to the proceeds from
the Initial Public Offering held in the Trust Account. If we do not complete a
Business Combination within the Combination Period, the Private Placement
Warrants will expire worthless. The Private Placement Warrants will be
non-redeemable for cash and exercisable on a cashless basis so long as they are
held by our Sponsor or its permitted transferees (except as set forth in Note 6
to our Financial Statements under "Redemption of warrants when the price per
shares of Class A common stock equals or exceeds $10.00").
Our Sponsor and our officers and directors agreed, subject to limited
exceptions, not to transfer, assign or sell any of their Private Placement
Warrants until 30 days after the completion of the initial Business Combination.
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Related Party Loans
On December 8, 2020, our Sponsor agreed to loan us an aggregate of up to
$300,000 to cover expenses related to the Initial Public Offering pursuant to a
promissory note (the "Note"). This loan was non-interest bearing and payable
upon the completion of the Initial Public Offering. As of March 4, 2021, we
borrowed approximately $136,000 under the Note. On March 8, 2021, we repaid the
Note in full which resulted in the Note no longer being available to draw from.
In addition, in order to finance transaction costs in connection with a Business
Combination, our Sponsor or an affiliate of our Sponsor, or certain of our
officers and directors may, but are not obligated to, loan us funds as may be
required ("Working Capital Loans"). If we complete a Business Combination, we
will repay the Working Capital Loans out of the proceeds of the Trust Account
released to us. 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, we may use a portion of proceeds held outside the Trust Account
to repay the Working Capital Loans, but no proceeds held in the Trust Account
would be used to repay the Working Capital Loans. 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 or, at the
lenders' discretion, up to $2.25 million 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, there were no Working
Capital Loans outstanding.
Administrative Services Agreement
Commencing on the effective date of the prospectus through the earlier of
consummation of the initial Business Combination and our liquidation, we agreed
to pay our Sponsor a total of $10,000 per month for office space, utilities and
secretarial and administrative support. We incurred $30,000 in expenses in
connection with such services in the three months ended September 30, 2022 and
2021, as reflected in the accompanying unaudited condensed statements of
operations. We incurred $90,000 and $70,000 in expenses in connection with such
services in the nine months ended September 30, 2022 and 2021, respectively, as
reflected in the accompanying unaudited condensed statements of operations. As
of September 30, 2022 and December 31, 2021, approximately $183,000 and
$100,000, respectively, of such expenses are included as accrued expenses on the
condensed balance sheets.
Our officers or directors will be reimbursed for any out-of-pocket expenses
incurred in connection with activities on our behalf such as identifying
potential target businesses and performing due diligence on suitable Business
Combinations. Our audit committee will review on a quarterly basis all payments
that were made to our Sponsor, officers or directors, or to us and our
affiliates. Any such payments prior to an initial Business Combination will be
made using funds held outside the Trust Account. Other than quarterly audit
committee review of such payments, we do not expect to have any additional
controls in place governing the reimbursement payments to our directors and
officers for their out-of-pocket expenses incurred in connection with
identifying and consummating an initial Business Combination.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities,
other than an agreement to pay our Sponsor a monthly fee of $10,000 for office
space, secretarial and administrative services.
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Registration Rights
The Initial Stockholders and holders of the Private Placement Warrants were
entitled to registration rights pursuant to a registration rights agreement. The
Initial Stockholders and holders of the Private Placement Warrants will be
entitled to make up to three demands, excluding short form registration demands,
that we 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 us. We will bear the
expenses incurred in connection with the filing of any such registration
statements.
Underwriting Agreement
We granted the underwriters a 45-day option to purchase up to 5,400,000
additional Units to cover any over-allotment, at the Initial Public Offering
price less the underwriting discounts and commissions. The warrants that would
be issued in connection with the 5,400,000 over-allotment Units are identical to
the public warrants and have no net cash settlement provisions. The underwriters
exercised the over-allotment option in full on March 4, 2021.
Critical Accounting Policies
This management's discussion and analysis of our financial condition and results
of operations is based on our unaudited condensed financial statements, which
have been prepared in accordance with U.S. GAAP. The preparation of our
unaudited condensed financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses and the disclosure of contingent assets and liabilities in our
unaudited condensed financial statements. On an ongoing basis, we evaluate our
estimates and judgments, including those related to fair value of financial
instruments and accrued expenses. We base our estimates on historical
experience, known trends and events and various other factors that we believe to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. We have identified the
following as its critical accounting policies:
Investments Held in the Trust Account
Our portfolio of investments is comprised of U.S. government securities, within
the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a
maturity of 185 days or less, or investments in money market funds that invest
in U.S. government securities and generally have a readily determinable fair
value, or a combination thereof. When our investments held in the Trust Account
are comprised of U.S. government securities, the investments are classified as
trading securities. When our investments held in the Trust Account are comprised
of money market funds, the investments are recognized at fair value. Trading
securities and investments in money market funds are presented on the condensed
balance sheets at fair value at the end of each reporting period. Gains and
losses resulting from the change in fair value of these securities is included
in interest earned on investments held in the Trust Account in the accompanying
unaudited condensed statements of operations. The estimated fair values of
investments held in the Trust Account are determined using available market
information.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our 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
classification of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is re-assessed at the end of
each reporting period.
The warrants issued in connection with the Initial Public Offering (the "Public
Warrants") and the Private Placement Warrants are recognized as derivative
liabilities in accordance with ASC 815. Accordingly, we recognize the warrant
instruments as liabilities at fair value and adjust the instruments to fair
value at each reporting period. The liabilities are subject to re-measurement at
each balance sheet date until exercised, and any change in fair value is
recognized in our unaudited condensed statements of operations. The fair value
of warrants issued by us in connection with the Initial Public Offering and
Private Placement have initially been estimated using Monte Carlo simulations at
each measurement date. The Private Placement warrants continue to be estimated
using Monte Carlo simulations. The fair value of the Public Warrants issued in
connection with the Initial Public Offering have subsequently been measured
based on the listed market price of such warrants then measured utilizing the
Level 2 input of the quoted listed trading price for such warrants as of
September 30, 2022. The determination of the fair value of the warrant liability
may be subject to change as more current information becomes available and
accordingly the actual results could differ significantly. Derivative warrant
liabilities are classified as non-current liabilities as their liquidation is
not reasonably expected to require the use of current assets or require the
creation of current liabilities.
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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." Class A common stock subject to mandatory redemption (if any) is
classified as liability instruments and is measured at fair value. Conditionally
redeemable Class A common stock (including Class A common stock that features
redemption rights that are either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within our
control) is classified as temporary equity. At all other times, Class A common
stock is classified as stockholders' equity. Our Class A common stock feature
certain redemption rights that are considered to be outside of our control and
subject to the occurrence of uncertain future events. Accordingly, as of
September 30, 2022 and December 31, 2021, 41,400,000 shares of Class A common
stock subject to possible redemption is presented as temporary equity, outside
of the stockholders' equity section of our condensed balance sheets.
We recognize changes in redemption value immediately as they occur and adjusts
the carrying value of the Class A common stock subject to possible redemption to
equal the redemption value at the end of each reporting period. This method
would view the end of the reporting period as if it were also the redemption
date for the security. Effective with the closing of the Initial Public
Offering, we recognized the accretion from initial book value to redemption
amount, which resulted in charges against additional paid-in capital (to the
extent available) and accumulated deficit. Subsequently, the Company recognized
changes in the redemption value as an increase in redemption value of Class A
common stock subject to redemption, as reflected on the accompanying unaudited
condensed statements of changes in stockholders' deficit.
Net Income Per Common Share
We complied with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." We have two classes of shares, which are referred to as
Class A common stock and Class B common stock. Income and losses are shared pro
rata between the two classes of shares. Net income per common share is
calculated by dividing the net income by the weighted average shares of common
stock outstanding for the respective period.
The calculation of diluted net income per common stock does not consider the
effect of the warrants issued in connection with the Initial Public Offering and
the Private Placement to purchase an aggregate of 17,870,000 shares of common
stock in the calculation of diluted income per share, because their exercise is
contingent upon future events. Accretion associated with the redeemable Class A
common stock is excluded from earnings per share as the redemption value
approximates fair value.
Recent Accounting Pronouncements
In June 2022, the FASB issued ASU 2022-03, ASC Subtopic 820 "Fair Value
Measurement of Equity Securities Subject to Contractual Sale Restrictions". The
ASU amends ASC 820 to clarify that a contractual sales restriction is not
considered in measuring an equity security at fair value and to introduce new
disclosure requirements for equity securities subject to contractual sale
restrictions that are measured at fair value. The ASU applies to both holders
and issuers of equity and equity-linked securities measured at fair value. The
amendments in this ASU are effective for the Company in fiscal years beginning
after December 15, 2024, and interim periods within those fiscal years. Early
adoption is permitted for both interim and annual financial statements that have
not yet been issued or made available for issuance. We are considering the
impact of this pronouncement on the financial statements.
We do not believe that any recently issued, but not yet effective, accounting
standards updates, if currently adopted, would have a material effect on the
accompanying unaudited condensed financial statements.
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JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" under
the JOBS Act and are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We elected to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, our unaudited condensed
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
As an "emerging growth company", we are not required to, among other things, (i)
provide an auditor's attestation report on our system of internal controls over
financial reporting pursuant to Section 404, (ii) provide all of the
compensation disclosure that may be required of non-emerging growth public
companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act,
(iii) comply with any requirement that may be adopted by the PCAOB regarding
mandatory audit firm rotation or a supplement to the auditor's report providing
additional information about the audit and the financial statements (auditor
discussion and analysis), and (iv) disclose certain executive compensation
related items such as the correlation between executive compensation and
performance and comparisons of the CEO's compensation to median employee
compensation. These exemptions will apply for a period of five years following
the completion of the Initial Public Offering or until we are no longer an
"emerging growth company," whichever is earlier.
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