Our key personnel may negotiate employment or consulting agreements as well as reimbursement of out-of-pocket expenses, if any, with a target business in connection with a particular business combination. These agreements may provide for them to receive compensation or reimbursement for out-of-pocket expenses, if any, following our initial business combination and as a result, may cause them to have conflicts of interest in determining whether a particular business combination is the most advantageous.
Our key personnel may be able to remain with the company after the completion of our initial business combination only if they are able to negotiate employment or consulting agreements in connection with the initial business combination. Additionally, they may negotiate reimbursement of any out-of-pocket expenses incurred on our behalf prior to the consummation of our initial business combination, should they choose to do so. Such negotiations would take place simultaneously with the negotiation of the initial business combination and could provide for such individuals to receive compensation in the form of cash payments and/or our securities for services they would render to us after the completion of the initial business combination, or as reimbursement for such out-of-pocket expenses. The personal and financial interests of such individuals may influence their motivation in identifying and selecting a target business. However, we believe the ability of such individuals to remain with us after the completion of our initial business combination will not be the determining factor in our decision as to whether or not we will proceed with any potential business combination. There is no certainty, however, that any of our key personnel will remain with us after the completion of our initial business combination. We cannot assure you that any of our key personnel will remain in senior management or advisory positions with us. The determination as to whether any of our key personnel will remain with us will be made at the time of our initial business combination. In addition, upon consummation of our initial business combination, our sponsor will be entitled to nominate three individuals for election to our board of directors.
Our officers and directors will allocate their time to other businesses thereby causing conflicts of interest in their determination as to how much time to devote to our affairs. This conflict of interest could have a negative impact on our ability to complete our initial business combination.
Our officers and directors are not required to, and will not, commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our operations and our search for an initial business combination and their other businesses. Each of our officers and directors is engaged in other business endeavors for which he may be entitled to substantial compensation and our officers and directors are not obligated to contribute any specific number of hours per week to our affairs. Our independent directors may also serve as officers or board members for other entities. If our officers’ and directors’ other business affairs require them to devote substantial amounts of time to such affairs in excess of their current commitment levels, it could limit their ability to devote time to our affairs which may have a negative impact on our ability to complete our initial business combination.
Certain of our officers and directors are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to be conducted by us and, accordingly, may have conflicts of interest in allocating their time and determining to which entity a particular business opportunity should be presented.
Following the completion of the initial public offering and until we consummate our initial business combination, we intend to engage in the business of identifying and combining with one or more businesses. Our officers and directors are, and may in the future become, affiliated with entities (such as operating companies or investment vehicles) that are engaged in a similar business.
There could be overlap between companies that would be suitable for a business combination with us and companies that present an attractive investment opportunity for our sponsor, our directors or officers, and entities with which they currently are or may in the future be affiliated.
Our officers and directors also may become aware of business opportunities which may be appropriate for presentation to us and other entities to which they owe certain fiduciary or contractual duties. Any such opportunities may present additional conflicts of interest in pursuing an acquisition target, and our directors and officers may have conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in our favor and a potential target business may be presented to another entity prior to its presentation to us. Our second amended and restated certificate of incorporation will provide that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation.
Our management may not be able to maintain control of a target business after our initial business combination.
We may structure an initial business combination so that the post-transaction company in which our public stockholders own shares will own less than 100% of the equity interests or assets of a target business, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for us not to be required to register as an investment company under the Investment Company Act. We will not consider any transaction that does not meet such criteria. Even if the post-transaction company owns 50% or more of the voting securities of the target, our stockholders prior to the initial business combination may collectively own a minority interest in the post business combination company, depending on valuations ascribed to the target and us in the initial business combination. For example, we could pursue a transaction in which we issue a substantial number of new shares of Class A common stock in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% interest in the target. However, as a result of the issuance of a substantial number of new shares of common stock, our stockholders immediately prior to such transaction could own less than a majority of our outstanding shares of common stock subsequent to such transaction. In addition, other minority stockholders may subsequently combine their holdings resulting in a single person or group obtaining a larger share of the company’s stock than we initially acquired. Accordingly, this may make it more likely that our management will not be able to maintain our control of the target business. We cannot provide assurance that, upon loss of control of a target business, new management will possess the skills, qualifications or abilities necessary to profitably operate such business.
Risks Relating to the Post-Business Combination Company
Any stockholders who choose to remain stockholders following our initial business combination could suffer a reduction in the value of their securities.
We will seek to complete an initial business combination with companies in the financial technology sector, but may also pursue other business combination opportunities, except that we will not, under our second amended and restated certificate of incorporation, be permitted to effectuate our initial business combination with another blank check company or similar company with nominal operations. To the extent we complete our initial business combination, we may be affected by numerous risks inherent in the business operations with which we combine. For example, if we combine with a financially unstable business or an entity lacking an established record of sales or earnings, we may be affected by the risks inherent in the business and operations of a financially unstable or a development stage entity. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all of the significant risk factors or that we will have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business. We also cannot assure you that an investment in our units will ultimately prove to be more favorable to investors than a direct investment, if such opportunity were available, in a business combination target. Accordingly, any stockholders who choose to remain stockholders following our initial business combination could suffer a reduction in the value of their securities. Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the proxy solicitation or tender offer materials, as applicable, relating to the business combination contained an actionable material misstatement or material omission.
Although we have identified general criteria and guidelines that we believe are important in evaluating prospective target businesses, we may enter into our initial business combination with a target that does not meet such criteria and guidelines, and as a result, the target business with which we enter into our initial business combination may not have attributes consistent with our general criteria and guidelines.
Although we have identified general criteria and guidelines for evaluating prospective target businesses, it is possible that a target business with which we enter into our initial business combination will not have these positive attributes. If we complete our initial business combination with a target that does not meet some or all of these guidelines, such combination may not be as successful as a combination with a business that does meet all of our general criteria and guidelines. In addition, if we announce a prospective business combination with a target that does not meet our general criteria and guidelines, a greater number of stockholders may exercise their redemption rights, which may make it difficult for us to meet any closing condition with a target business that requires us to have a minimum net worth or a certain amount of cash. In addition, if stockholder approval of the transaction is required by law, or we decide to obtain stockholder approval for business or other reasons, it may be more difficult for us to attain stockholder approval of our initial business combination if the target business does not meet our general criteria and guidelines. If we do not complete our initial business combination, our public stockholders may receive only approximately $10.00 per share on the liquidation of our trust account and our warrants will expire worthless.
We may seek business combination opportunities with a financially unstable business or an entity lacking an established record of revenue, cash flow or earnings, which could subject us to volatile revenues, cash flows or earnings or difficulty in retaining key personnel.
To the extent we complete our initial business combination with a financially unstable business or an entity lacking an established record of revenues or earnings, we may be affected by numerous risks inherent in the operations of the business with which we combine. These risks include volatile revenues or earnings and difficulties in obtaining and retaining key personnel. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we may not be able to properly ascertain or assess all of the significant risk factors and we may not have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business.
We may issue additional common stock or preferred stock to complete our initial business combination or under an employee incentive plan after completion of our initial business combination. We may also issue shares of Class A common stock upon the conversion of the Class B common stock at a ratio greater than one-to-one at the time of our initial business combination as a result of the anti-dilution provisions contained in our second amended and restated certificate of incorporation. Any such issuances would dilute the interest of our stockholders and likely present other risks.
Our second amended and restated certificate of incorporation authorizes the issuance of up to 100,000,000 shares of Class A common stock, par value $0.0001 per share, 10,000,000 shares of Class B common stock, par value $0.0001 per share, and 1,000,000 shares of preferred stock, par value $0.0001 per share. Shares of Class B common stock are convertible into shares of our Class A common stock initially at a one-for-one ratio but subject to adjustment as set forth herein, including in certain circumstances in which we issue Class A common stock or equity-linked securities related to our initial business combination. Shares of Class B common stock are also convertible at the option of the holder at any time.
We may issue a substantial number of additional shares of common or preferred stock to complete our initial business combination or under an employee incentive plan after completion of our initial business combination. We may also issue shares of Class A common stock to redeem the warrants or upon conversion of the Class B common stock at a ratio greater than one-to-one at the time of our initial business combination as a result of the anti-dilution provisions contained in our second amended and restated certificate of incorporation. However, our second amended and restated certificate of incorporation will provide, among other things, that prior to or in connection with our initial business combination, we may not issue additional shares of capital stock that would entitle the holders thereof to (i) receive funds from the trust account or (ii) vote on any initial business combination. These provisions of our second amended and restated certificate of incorporation, like all provisions of our second amended and restated certificate of incorporation, may be amended with the approval of our stockholders. However, our sponsor, officers and directors have agreed, pursuant to a letter agreement with us, that they will not propose any amendment to our second amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing of the initial public offering or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable), divided by the number of then outstanding public shares.
The issuance of additional shares of common or preferred stock:
| • | may significantly dilute the equity interest of investors in the initial public offering; |
| • | may subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded our common stock; |
| • | could cause a change of control if a substantial number of shares of our 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; and |
| • | may adversely affect prevailing market prices for our units, Class A common stock and/or warrants. |
We may amend the terms of the warrants in a manner that may be adverse to holders of public warrants with the approval by the holders of at least 50% of the then outstanding public warrants. As a result, the exercise price of your warrants could be increased, the exercise period could be shortened and the number of shares of our Class A common stock purchasable upon exercise of a warrant could be decreased, all without your approval.
Our warrants will be issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants. Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 50% of the then outstanding public warrants approve of such amendment. Although our ability to amend the terms of the public warrants with the consent of at least 50% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants into cash or stock, shorten the exercise period or decrease the number of shares of our Class A common stock purchasable upon exercise of a warrant.
Our warrant agreement designates the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of our warrants, which could limit the ability of warrant holders to obtain a favorable judicial forum for disputes with our company.
Our warrant agreement provides that, subject to applicable law, (i) any action, proceeding or claim against us arising out of or relating in any way to the warrant agreement will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and (ii) that we irrevocably submit to such jurisdiction, which jurisdiction shall be the exclusive forum for any such action, proceeding or claim. We will waive any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.
Notwithstanding the foregoing, these provisions of the warrant agreement will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive forum.
This choice-of-forum provision may limit a warrant holder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with our company, which may discourage such lawsuits. Alternatively, if a court were to find this provision of our warrant agreement inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors.
We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of our Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like and certain issuances of Class A common stock and equity-linked securities) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date on which we give proper notice of such redemption and provided certain other conditions are met. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force you (i) to exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your warrants.
In addition, we have the ability to redeem the outstanding public warrants at any time after they become exercisable and prior to their expiration, at a price of $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that the closing price of our Class A common stock equals or exceeds $10.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to proper notice of such redemption and provided that certain other conditions are met, including that holders will be able to exercise their warrants prior to redemption for a number of shares of Class A common stock determined based on the redemption date and the fair market value of shares of our Class A common stock. The value received upon exercise of the warrants (1) may be less than the value the holders would have received if they had exercised their warrants at a later time where the underlying share price is higher and (2) may not compensate the holders for the value of the warrants, including because the number of shares received is capped at 0.361 shares of Class A common stock per whole warrant (subject to adjustment) irrespective of the remaining life of the warrants.
General Risk Factors
We are not required to obtain an opinion from an independent investment banking firm or from an independent accounting firm, and consequently, you may have no assurance from an independent source that the price we are paying for the business is fair to our company from a financial point of view.
Unless we complete our initial business combination with an affiliated entity or our board cannot independently determine the fair market value of the target business or businesses, we are not required to obtain an opinion from an independent investment banking firm or an independent accounting firm that the price we are paying is fair to our company from a financial point of view. If no opinion is obtained, our stockholders will be relying on the judgment of our board of directors, who will determine fair market value based on standards generally accepted by the financial community. Such standards used will be disclosed in our proxy materials or tender offer documents, as applicable, related to our initial business combination.
We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies or smaller reporting companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our 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. As a result, our stockholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the aggregate worldwide market value of our Class A common stock held by non-affiliates equals or exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
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 an election to opt out is irrevocable. We have 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, we, 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 our 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.
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by non-affiliates equals or exceeds $250 million as of the prior June 30th, and (2) our annual revenues equal or exceed $100 million during such completed fiscal or the market value of our common stock held by non-affiliates equals or exceeds $700 million as of the prior June 30th. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements and other disclosures with other public companies difficult or impossible.
Compliance obligations under the Sarbanes-Oxley Act may make it more difficult for us to effectuate our initial business combination, require substantial financial and management resources, and increase the time and costs of completing an initial business combination.
Section 404 of the Sarbanes-Oxley Act requires that we evaluate and report on our system of internal controls beginning with our Annual Report on Form 10-K for the year ending December 31, 2021. Only in the event we are deemed to be a large accelerated filer or an accelerated filer, and no longer qualify as an emerging growth company, will we be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. Further, for as long as we remain an emerging growth company, we will not be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. The fact that we are a blank check company makes compliance with the requirements of the Sarbanes-Oxley Act particularly burdensome on us as compared to other public companies because a target company with which we seek to complete our initial business combination may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of its internal controls. The development of the internal control of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such business combination.
Provisions in our second amended and restated certificate of incorporation and Delaware law may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our Class A common stock and could entrench management.
Our second amended and restated certificate of incorporation contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. These provisions include the ability of the board of directors to designate the terms of and issue new series of preferred stock, and the fact that prior to the completion of our initial business combination, only holders of shares of our Class B common stock will vote for the election of directors, which may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisions may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
Our second amended and restated certificate of incorporation will require, to the fullest extent permitted by law, that derivative actions brought in our name, actions against our directors, officers, other employees or stockholders for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel, which may have the effect of discouraging lawsuits against our directors, officers, other employees or stockholders.
Our second amended and restated certificate of incorporation will require, to the fullest extent permitted by law, that derivative actions brought in our name, actions against our directors, officers, other employees or stockholders for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel except any action (A) as to which the Court of Chancery in the State of Delaware determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, (C) for which the Court of Chancery does not have subject matter jurisdiction, or (D) any action created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our second amended and restated certificate of incorporation. Unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for any action arising under the Securities Act. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. Alternatively, if a court were to find the choice of forum provision contained in our second amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.
Our second amended and restated certificate of incorporation will provide that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law, subject to certain exceptions. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. In addition, our second amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, or the rules and regulations promulgated thereunder. We note, however, that there is uncertainty as to whether a court would enforce this provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.
Cyber incidents or attacks directed at us could result in information theft, data corruption, operational disruption and/or financial loss.
We depend on digital technologies, including information systems, infrastructure and cloud applications and services, including those of third parties with which we may deal. Sophisticated and deliberate attacks on, or security breaches in, our systems or infrastructure, or the systems or infrastructure of third parties or the cloud, could lead to corruption or misappropriation of our assets, proprietary information and sensitive or confidential data. As an early stage company without significant investments in data security protection, we may not be sufficiently protected against such occurrences. We may not have sufficient resources to adequately protect against, or to investigate and remediate any vulnerability to, cyber incidents. It is possible that any of these occurrences, or a combination of them, could have adverse consequences on our business and lead to financial loss.
We may face risks related to financial technology businesses.
Business combinations with financial technology businesses may involve special considerations and risks. If we complete our initial business combination with a financial technology business, we will be subject to the following risks, any of which could be detrimental to us and the business we acquire:
| • | If the company or business we acquire provides products or services which relate to the facilitation of financial transactions, such as funds or securities settlement system, and such product or service fails or is compromised, we may be subject to claims from both the firms to whom we provide our products and services and the clients they serve; |
| • | If we are unable to keep pace with evolving technology and changes in the financial services industry, our revenues and future prospects may decline; |
| • | Our ability to provide financial technology products and services to customers may be reduced or eliminated by regulatory changes; |
| • | Any business or company we acquire could be vulnerable to cyberattack or theft of individual identities or personal data; |
| • | Difficulties with any products or services we provide could damage our reputation and business; |
| • | A failure to comply with privacy regulations could adversely affect relations with customers and have a negative impact on business; |
| • | We may not be able to protect our intellectual property and we may be subject to infringement claims. |
Any of the foregoing could have an adverse impact on our operations following a business combination. However, our efforts in identifying prospective target businesses will not be limited to financial technology businesses. Accordingly, if we acquire a target business in another industry, these risks will likely not affect us and we will be subject to other risks attendant with the specific industry in which we operate or target business which we acquire, none of which can be presently ascertained.
Risks Related to the COVID-19 Pandemic
Our ability to successfully effect our initial business combination may be affected by the spread of the novel Coronavirus.
Economic growth and financial conditions in most markets have been negatively impacted by the outbreak and spread of the novel Coronavirus (“COVID-19”). Additionally, as a result of COVID-19, there has been a significant increase in market volatility and uncertainty related to market and financing conditions. Our ability to find and evaluate potential target businesses may be negatively impacted by economic effects of COVID-19 and measures taken by governments and businesses to contain the effects of COVID-19. If we identify one or more target businesses, we may be unable to complete an initial business combination with the target business due to poor economic and financial conditions as a result of COVID-19 or containment measures taken by local governments. Moreover, our ability to engage with target businesses and the timeframe associated with a business combination transaction may be negatively impacted by COVID-19 and its related impacts.
| Item 1B. | Unresolved Staff Comments |
None.
We currently maintain our executive offices at 292 Newbury Street, Suite 293 Boston, MA 02115. We consider our current office space adequate for our current operations.
None.
| Item 4. | Mine Safety Disclosures |
Not applicable.
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuers Purchases of Equity Securities |
Market Information
Our units, Class A common stock and warrants are traded on Nasdaq under the symbols LFTRU, LFTR and LFTRW, respectively.
Holders
As of December 31, 2020, there was 1 holder of record of our units, 1 holder of record of our Class A ordinary shares, 4 holders of record of our Class B ordinary shares and 2 holders of record of our warrants.
Dividends
We have not paid any cash dividends on our common stock to date and do not intend to pay cash dividends prior to the completion of our initial business combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of our initial business combination. The payment of any cash dividends subsequent to our initial business combination will be within the discretion of our board of directors at such time. In addition, our board of directors is not currently contemplating and does not anticipate declaring any stock dividends in the foreseeable future. Further, if we incur any indebtedness in connection with our initial business combination, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Offering
On October 23, 2020 the Company consummated our Initial Public Offering of 20,000,000 units at $10.00 per Unit, generating gross proceeds of $200,000,000.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 4,000,000 warrants at a price of $1.50 per Private Placement Warrant in a private placement to our Sponsor, generating gross proceeds of $6,000,000.
On November 13, 2020, the underwriter partially exercised its over-allotment option and on November 17, 2020, purchased an additional 709,894 Units (the “Over-Allotment Units”), generating gross proceeds of $7,098,940. In connection with the underwriter’s partial exercise of its over-allotment option, the Sponsor purchased an additional 94,653 Private Placement warrants, generating gross proceeds to the Company of $141,979.
In connection with the closing and sale of the Over-Allotment Units and 94,653 additional Private Placement Warrants, a total of $7,098,940 comprised of $6,956,961 of the proceeds from the closing and sale of the Over-Allotment Units (which amount includes $248,463 of the Underwriter’s deferred discount) and $141,979 of the proceeds of the sale of the additional 94,653 Private Placement Warrants, was placed in a trust account established for the benefit of the Company’s public stockholders.
There has been no material change in the planned use of proceeds from such use as described in the Company’s final prospectus dated October 22, 2020.
| Item 6. | Selected Financial Data |
As a “smaller reporting company,” we are not required to provide the information called for by this Item.
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our audited financial statements and the notes related thereto which are included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Special Note Regarding Forward-Looking Statements,” “Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K/A.
Overview
We are a blank check company formed under the laws of the State of Delaware on August 20, 2020 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar Business Combination with one or more businesses. We intend to effectuate our Business Combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, 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.
Restatement and Revision of Previously Issued Financial Statements
This Management’s Discussion and Analysis of Financial Condition and Results of Operations has been amended and restated to give effect to the restatement and revision of our Original Financial Statements. We are restating our historical financial results to reclassify our Warrants as derivative liabilities pursuant to ASC 815-40 rather than as a component of equity as we had previously treated the Warrants. The impact of the restatement is reflected in the Management’s Discussion and Analysis of Financial Condition and Results of Operations below. Other than as disclosed in the Explanatory Note and with respect to the impact of the restatement, no other information in this Item 7 has been amended and this Item 7 does not reflect any events occurring after the Original Filing. The impact of the restatement is more fully described in Note 2 to our financial statements included in Item 15 of Part IV of this Amendment and Item 9A: Controls and Procedures, both contained herein.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from inception through December 31, 2020, were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and, subsequent to the Initial Public Offering, identifying 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 expect to generate non-operating income in the form of interest income on marketable securities held after the Initial Public Offering. 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.
As a result of the restatement described in Note 2 of the notes to the financial statements included herein, we classify the warrants issued in connection with our Initial Public Offering as liabilities at their fair value and adjust the warrant instrument to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations.
For the period from August 20, 2020 (inception) through December 31, 2020, we had a net loss from operations of $12,874,353, which consisted of formation costs of $770,470, a change in the fair value of the warrant liability of $11,690,720, and transaction costs associated with the IPO of 442,751, offset by interest earned on marketable securities held in the Trust Account of $29,588.
Liquidity and Capital Resources
As of December 31, 2020, we had $1,017,569 in cash. Until the consummation of the Initial Public Offering, our only source of liquidity was an initial purchase of common stock by the Sponsor and loans from our Sponsor.
On October 23, 2020, we consummated the Initial Public Offering of 20,000,00 Units at a price of $10.00 per Unit, generating gross proceeds of $200,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 4,000,000 Private Placement Warrants at a price of $1.50 per Private Placement Warrant in a private placement to our stockholders, generating gross proceeds of $6,000,000.
On November 17, 2020, the Company issued an additional 709,894 Units issued for total gross proceeds of $7,098,940 in connection with the underwriters’ partial exercise of their over-allotment option. Simultaneously with the partial closing of the over-allotment option, we also consummated the sale of an additional 94,653 Private Placement Warrants at $1.50 per Private Placement Warrant, generating total proceeds of $141,979.
Following the Initial Public Offering, the partial exercise of the over-allotment option by the underwriters’ and the sale of the Private Placement Warrants, a total of $207,098,940 was placed in the Trust Account. We incurred $11,808,264 in transaction costs, including $4,141,979 of underwriting fees, $7,248,463 of deferred underwriting fees and $417,822 of other offering costs.
For the period from August 20, 2020 (inception) through December 31, 2020, cash used in operating activities was $808,421. Net loss of $12,874,353 was affected by transaction costs associated with the IPO of $442,751, a change in the fair value of the warrant liability of $11,690,720, interest earned on investments held in the Trust Account of $29,588 and changes in operating assets and liabilities, which provided $104,028 of cash for operating activities.
As of December 31, 2020, we had cash and investments held in the Trust Account of $207,128,528. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account to complete our Business Combination. We may withdraw interest to pay taxes. During the period ended December 31, 2020, we did not withdraw any interest income from the Trust Account. 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.
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, 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. If we complete a Business Combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. 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 $2,000,000 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.
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 financing arrangements
We did not have any off-balance sheet arrangements as of December 31, 2020.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than described below.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $7,248,463 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.
Critical Accounting Policies
The preparation of 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 periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Warrant Liability
We account for the Warrants in accordance with the guidance contained in ASC 815-40 under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the Warrants as liabilities at their fair value and adjust the Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. The Private Warrants and the Public Warrants for periods where no observable traded price was available are valued using a Monte Carlo simulation. For periods subsequent to the detachment of the Public Warrants from the Units, the Public Warrant quoted market price was used as the fair value as of each relevant date.
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 is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that is 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, 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’ equity section of our balance sheet.
Net Income (Loss) per Common Share
We apply the two-class method in calculating earnings per share. Net income per common share, basic and diluted for Class A redeemable common stock is calculated by dividing the interest income earned on the Trust Account, net of applicable franchise and income taxes, by the weighted average number of Class A redeemable common stock outstanding for the period. Net loss per common share, basic and diluted for Class B non-redeemable common stock is calculated by dividing the net income, less income attributable to Class A redeemable common stock, by the weighted average number of Class B non-redeemable common stock outstanding for the period presented.
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 financial statements.
| Item 7a. | Quantitative and Qualitative Disclosures About Market Risk |
As of December 31, 2020, we were not subject to any market or interest rate risk. Following the consummation of our Initial Public Offering, the net proceeds of our Initial Public Offering, including amounts in the Trust Account, have been invested in U.S. government treasury obligations with a maturity of 185 days or less or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
| Item 8. | Financial Statements and Supplementary Data |
This information appears following Item 15 of this Report and is included herein by reference.
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
None.
| Item 9A. | 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.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our certifying officers carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2021. Based upon their evaluation, our certifying officers concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were effective.
Based upon that evaluation, our certifying officers concluded that, due to the existence of a material weakness found in our internal controls over financial reporting described below and the Company’s restatement of its financial statements to reclassify the Company’s Public Warrants and Private Placement Warrants as described in the Note 2 to the financial statements included herein, our disclosure controls and procedures were not effective as of December 17, 2020, the date of our previously issued balance sheet filed with the SEC on Form 8-K.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected and corrected on a timely basis. In preparation of our financial statements for the period covered by this report, we identified a material weakness in internal control over financial reporting related to our control environment existed as of December 17, 2020, as described below.
Specifically, we identified a material weakness with respect to the classification of the Company’s Warrants as components of equity instead of as derivative liabilities. Upon issuance, our Warrants were accounted for as equity within our balance sheet. On April 12, 2021, the SEC issued the SEC Staff Statement in which it expressed its view that certain terms and conditions common to warrants issued by SPACs may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to equity. After discussion and evaluation, taking into consideration the SEC Staff Statement, including with our independent registered public accounting firm, we have concluded that our Warrants should be presented as liabilities with subsequent fair value remeasurement. As discussed below and elsewhere in this Quarterly Report, this material weakness resulted in a restatement of our financial statements. Notwithstanding the identified material weakness, management believes that the Financial Statements and related financial information included in this Quarterly Report fairly present, in all material respects, our balance sheets, statements of operations, shareholders’ equity and cash flows as of and for the periods presented.
Remediation Plan
As a newly created organization, we are currently in the process of implementing our financial reporting processes and will incorporate enhanced communication and documentation procedures between our operations team and the individuals responsible for preparation of financial statements. These controls are expected to include the implementation of additional supervision and review activities by qualified personnel, and the development and use of checklists and research tools to assist in compliance with GAAP. We intend to complete the enhancement of our financial reporting processes during fiscal year 2021. The process of designing and implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments. Additionally, we must expend resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations. As we continue to evaluate and take actions to improve our internal control over financial reporting, we may determine to take additional actions to address control deficiencies or determine to modify certain of the remediation measures described above. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate the material weakness we have identified or avoid potential future material
Management’s Report on Internal Controls Over Financial Reporting
This Annual Report on Form 10-K/A does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.
Restatement of Previously Issued Financial Statements
On May 19, 2021, we revised our prior position on accounting for warrants and concluded that our previously issued financial statements as of and for the period from August 20, 2020 (inception) through December 31, 2020 should not be relied on because of a misapplication in the guidance on warrant accounting. However, the non-cash adjustments to the financial statements do not impact the amounts previously reported for our cash and cash equivalents, total assets, revenue or cash flows.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Due solely to the events that led to our restatement of our financial statements, management has identified a material weakness in internal controls related to the accounting for warrants issued in connection with our initial public offering, as described in Note 2 to the Notes to our Financial Statements. In light of the restatement of our Original Financial Statements included in this Amendment, we plan to enhance our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
| Item 9B. | Other Information |
None.
| Item 10. | Directors, Executive Officers, and Corporate Governance |
Officers and Directors
| Name | | Age | | Title |
| Mark Casady | | 60 | | Chairman of the Board of Directors |
| Karl Roessner | | 53 | | Chief Executive Officer and Director |
| Jon Isaacson | | 50 | | Chief Financial Officer and Chief Corporate Development Officer |
| David Bergers | | 53 | | General Counsel |
| Ryan Parker | | 46 | | Vice Chairman |
| Asiff Hirji | | 54 | | Director |
| Charles Roame | | 55 | | Director |
| April Rudin | | 60 | | Director |
Our directors and executive officers are as follows:
Mark Casady, our Executive Chairman, has a proven track record as Chairman and CEO of a major publicly traded financial services company and has led multiple successful acquisitions throughout his career. Since May 2015, Mr. Casady has served as General Partner and Chairman of the Advisory Board of Vestigo Ventures (“Vestigo”), a venture capital firm he co-founded that focuses on investing in early-stage FinTech companies. Mr. Casady’s investment thesis for Vestigo is that financial services are undergoing tremendous changes that require the industry to lower its costs and better serve clients. Vestigo backs early stage FinTech companies that can help bring these solutions to the incumbents. From August 2002 to January 2017, Mr. Casady held a variety of roles with LPL Financial Holdings, Inc. (“LPL”) (NASDAQ: LPLA) and most recently served as Chairman of the Board and Chief Executive Officer, retiring as Chairman of the Board in March 2017 and as Chief Executive Officer in January 2017. Mr. Casady guided LPL to become a leading financial services organization that serves independent financial advisors, banks and credit unions, and provides clearing services to broker-dealers at financial services companies. He is currently a member of the Board of Directors of Horace Mann Educators Corporation (NYSE: HMN). He was a member of the Board of Directors of Citizens Financial Group, Inc. (NYSE: CFG) (April 2014 to April 2020), where he oversaw its transition to a public company, and Jobcase, Inc. (January 2019 to July 2020), where he oversaw its sale to PSG. He currently serves as an advisor to EverQuote, Inc. (NASDAQ: EVER). He also serves on the Board of Directors of several Vestigo portfolio companies, including Kingfield Corporation, ZenLedger.io, TowerIQ and Digital Asset Data, Inc. Mr. Casady is a former member of the Financial Industry Regulatory Authority (“FINRA”) Board of Governors and previously served on the EZE Software Group Board of Directors during its acquisition by TPG Growth and subsequent sale to SS&C. Additionally, Mr. Casady is treasurer of the Casady family’s One Step Forward Education Foundation, which focuses on changing the lives of children around the globe through education. He also helped found and fund the Invest in Others Charitable Foundation, which recognizes the philanthropic activity of financial advisors. Mr. Casady received his Bachelor of Science from Indiana University and his Master of Business Administration from DePaul University.
Mr. Casady is qualified to serve as a director because of industry expertise and his experience as a board member of financial services companies.
Karl Roessner, our Chief Executive Officer, has more than ten years of experience as an executive in the financial services industry with a demonstrated track record of leading growth and transformation, strategic turnaround, acquisitions and integrations. From September 2016 to August 2019, Mr. Roessner served as the Chief Executive Officer and a member of the Board of Directors of E*TRADE Financial Corp. (“E*TRADE”) (NASDAQ: ETFC), where he led the company’s turnaround, significantly grew revenue, expanded operating margin, improved the rate of new account and net asset growth, executed key acquisitions and integrations to augment and enhance customer offerings and served as a key advisor to an active public company Board of Directors. Mr. Roessner concurrently served as President and a member of the Board of Directors of E*TRADE Bank, a wholly owned banking subsidiary of E*TRADE. After stepping down as CEO of E*TRADE and President of E*TRADE Bank, Mr. Roessner served as a senior advisor to E*TRADE from August 2019 to December 2019. Prior to being named CEO, Mr. Roessner served as E*TRADE’s Executive Vice President, General Counsel and Secretary from May 2009 to September 2016. Before joining E*TRADE, Mr. Roessner was a Partner at Clifford Chance US LLP in its Mergers & Acquisitions Group. Mr. Roessner has been proposed by American Challenger Bank, National Association to become one of its directors upon the approval of its application for a national banking charter, which has been filed with the Office of the Comptroller of the Currency. Mr. Roessner received his Bachelor of Business Administration from Siena College and his Juris Doctor degree from St. John’s University School of Law.
Mr. Roessner is qualified to serve as director because of his industry expertise and his experience as a board member of a financial services company.
Jon Isaacson, our Chief Financial Officer and Chief Corporate Development Officer, has nearly two decades of experience working in the private equity and venture capital industries as both an investor and executive. From January 2019 to December 2019, Mr. Isaacson served as the Chief Financial Officer of Senseonics, Inc. (NYSE: SENS), a portfolio company of venture capital firm New Enterprise Associates, and provided advisory services to Senseionics from January 2020 to June 2020. Prior to joining Senseonics, Mr. Isaacson served as the Chief Financial Officer of Edelman Financial Services, LLC from November 2017 to December 2018. Before joining Edelman Financial Services, Mr. Isaacson served as a Managing Director for over 14 years at American Capital, Ltd from November 2002 to January 2017. Mr. Isaacson also held roles at Thayer Capital Partners, L.P., GTCR LLC, McKinsey & Company and Morgan Stanley & Co., LLC. Mr. Isaacson served as a director of each of ECA Medical Instruments, The Meadows and Alchemy Corporation from 2014 to 2016, where he served on the compensation and audit committees of each. Mr. Isaacson received his Bachelor of Arts in Political Science from The Johns Hopkins University and his Master of Business Administration from Stanford University Graduate School of Business.
David Bergers, our General Counsel, has over 25 years of experience as corporate counsel, senior SEC regulator and private practitioner and has helped numerous companies proactively adapt to the constantly changing compliance and regulatory landscape of the financial services industry. Mr. Bergers has served as the Vice President of External Relations and General Counsel at Eastern Nazarene College since August 2020. Prior to joining Eastern Nazarene College, Mr. Bergers was a Partner at Jones Day from July 2017 to February 2020, where he advised companies in the wealth management and FinTech space on their compliance obligations and represented them in regulatory examinations and investigations. Before joining Jones Day, Mr. Bergers served as General Counsel and Managing Director for Legal and Government Relations at LPL from August 2013 to June 2017. Mr. Bergers also spent over a decade working for the U.S. Securities and Exchange Commission from September 1998 to May 2000 and November 2001 to June 2013, including as Acting Deputy Director, Division of Enforcement, and Director of the SEC’s Boston office, with responsibility for oversight of registered investment advisers, broker-dealers and public companies in six New England states. Mr. Bergers previously held roles at Tucker Anthony Inc., Choate, Hall & Stewart LLP and Lowenthal & Abrams, P.C. Mr. Bergers received his Bachelor of Arts in History from Eastern Nazarene College and his Juris Doctor degree from Yale Law School.
Ryan Parker, our Vice Chairman, has served as Principal at Parker Perspectives LLC, a provider of advisory, board and consulting services in the asset management, wealth management and FinTech industries, since January 2020. From June 2016 to December 2018, Mr. Parker served as the Chief Executive Officer of Edelman Financial Services, LLC, succeeding the company’s founder after 30 years to lead the fifth largest independent registered investment advisor (“RIA”) firm. Mr. Parker led all aspects of Edelman Financial Services, a portfolio company of Hellman & Friedman LLC (“H&F”), serving tens of thousands of client households with billions of dollars in assets under management, and worked with H&F to consummate a merger with Financial Engines that created the nation’s largest independent RIA firm - Edelman Financial Engines, LLC. Prior to joining Edelman Financial Services, from March 2013 to May 2016, Mr. Parker served as the Managing Director of Investment & Planning Solutions at LPL, where he was responsible for helping LPL advisors and institutions grow by leading the firm’s sales, marketing, product management and sponsor relations teams across the advisory, brokerage, insurance, planning and retirement businesses. Mr. Parker also served as a Managing Director at Russell Investments Group, LLC from December 2007 to March 2013 and a Director at Franklin Templeton Investments (NYSE: BEN) from October 2002 to December 2007. Mr. Parker served as a director of the Investment Program Association from January 2014 to June 2016. Mr. Parker received his Bachelor of Arts in Political Science from the University of Michigan and an Executive Education certificate in Finance and Accounting from Stanford University Graduate School of Business.
Asiff Hirji, a member of our Board of Directors, has served as the President of Figure Technologies, Inc. (“Figure”), a blockchain-based home equity lender since January 2020. Prior to joining Figure, from November 2017 to June 2019, Mr. Hirji served as President and COO of Coinbase, Inc. (“Coinbase”), where he helped significantly grow the company’s revenue and valuation. Prior to Coinbase, Mr. Hirji was an Operating Advisor with Andreessen Horowitz from October 2016 to December 2017, Chief Restructuring Officer of Hewlett Packard Inc. (NYSE: HPQ) from November 2014 to March 2017, and served as President and COO of TD Ameritrade from July 2005 to October 2006. Mr. Hirji has also held senior leadership roles with TPG Capital, Saxo Bank A/S, Hewlett-Packard and Bain Capital, and has served on a number of public and private boards, including Citrix Systems from May 2006 to July 2015, Advent Software from September 2011 to July 2015, and Saxo Bank A/S from December 2010 to September 2018. Mr. Hirji has served as an Advisory Board Member for Nubank (Nu Pagamentos S.A.) since December 2019 and as a Director of Forge (formerly Equidate) since November 2019. Mr. Hirji received his Bachelor of Science in Computer Science from University of Calgary and his Master of Business Administration from Ivey Business School at Western University.
Mr. Hirji is qualified to serve as a director because of his background serving as a board member of public and private companies, leading and scaling financial services companies as an operator and investing in private companies.
Charles Roame, a member of our Board of Directors, has more than two decades of experience providing strategic advice to CEOs, other senior executives and boards of directors in the banking, insurance, brokerage, investment management and FinTech sectors. Since April 1998, Mr. Roame has served as the Managing Partner of Tiburon Strategic Advisors (“Tiburon”), a leading provider of market research and strategy consulting services to financial services firms, and has served as the Managing Partner of the Tiburon Partners Fund, a financial services and FinTech-focused fund, since August 2011. Prior to forming Tiburon in 1998, Mr. Roame served as a management consultant at McKinsey & Company from May 1992 to June 1995, and later as a business strategist at The Charles Schwab Corporation (NYSE: SCHW) from July 1995 to February 1998. Mr. Roame has served as a member of the Board of Directors at Edelman Financial Engines since January 2014, Facet Wealth since January 2018, and SA Mutual Funds since June 2012 and formerly served at Envestnet (NYSE: ENV) from August 2011 to September 2020, including as Vice Chairman and a member of the Board of Directors. Mr. Roame received his Bachelor of Arts from the Michigan State University and his Master of Business Administration from the Stephen M. Ross School of Business at the University of Michigan.
Mr. Roame is qualified to serve as a director because of his financial services industry expertise and his direct experience as a board member of financial services companies.
April Rudin, a member of our Board of Directors, is an acclaimed financial services and wealth management marketing strategist and Founder and President of The Rudin Group, a financial services marketing firm she founded in March 2010. Ms. Rudin has more than a decade of experience with The Rudin Group designing bespoke marketing campaigns for banks, wealth managers and family offices. Previously, Ms. Rudin served as a Global Office Automation Director at Kelly Services from February 1983 to September 1992 and as a Director of Business Development at Alpine Capital Bank from March 2007 to November 2009. Ms. Rudin has been a featured source of expert commentary in Huffington Post, American Banker, CFA Enterprising Investor, Investment News, Family Wealth Report and other trade publications. Ms. Rudin is a member of the Advisory Board at Private Asset Management, the Board of Advisors for Mirador, LLC and the Global Board of Directors for the Hedge Fund Association, for which Ms. Rudin chairs the High Net Worth Advisory Board. Ms. Rudin received her Bachelor of Arts from Wayne State University.
Ms. Rudin is qualified to serve as a director because of her industry knowledge and domain expertise, as well as her extensive experience advising financial services organizations as a board member.
Number and Terms of Officers and Directors.
Our board of directors consists of five members. Each director holds office for a two-year term. Prior to the completion of an initial business combination, any vacancy on the board of directors may be filled by a nominee chosen by holders of a majority of our founder shares. In addition, prior to the completion of an initial business combination, holders of a majority of our founder shares may remove a member of the board of directors for any reason. Additionally, in accordance with the Nasdaq corporate governance requirements, we are not required to hold an annual meeting until one full year after our first fiscal year end following our listing on Nasdaq. As a result, we may not hold an annual meeting of stockholders until after we consummate our initial business combination. Upon consummation of an initial business combination, we will be entitled to nominate three individuals for election to our board of directors.
Our officers are appointed by the board of directors and serve at the discretion of the board of directors. Our board of directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide that our officers may consist of a Chairman of the Board, Chief Executive Officer, Chief Financial Officer, President, Vice Presidents, Secretary, Treasurer, Assistant Secretaries and such other offices as may be determined by the board of directors.
Director Independence
NASDAQ listing standards require that a majority of our board of directors be independent. An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Our board of directors has determined that each of Asiff Hirji, Charles Roame, and April Rudin are “independent directors” as defined in NASDAQ listing standards and applicable SEC rules.
Committees of the Board of Directors
Our board of directors has two standing committees: an audit committee and a compensation committee. Both our audit committee and our compensation committee are composed solely of independent directors.
Audit Committee
The members of our audit committee of the board of directors are Asiff Hirji, Charles Roame and April Rudin. Asiff Hirji serve as chairman of the audit committee.
Each member of the audit committee is financially literate and our board of directors has determined that Asiff Hirji qualifies as an “audit committee financial expert” as defined in applicable SEC rules.
We have adopted an audit committee charter, which details the principal functions of the audit committee, including:
| • | assisting board oversight of (1) the integrity of our financial statements, (2) our compliance with legal and regulatory requirements, (3) the independent registered public accounting firm’s qualifications and independence and (4) the performance of our internal audit function and the independent registered public accounting firm; |
| • | the appointment, compensation, retention, replacement, and oversight of the work of the independent registered public accounting firm engaged by us; |
| • | pre-approving all audit and permitted non-audit services to be provided by the independent registered public accounting firm engaged by us, and establishing pre-approval policies and procedures; |
| • | setting clear hiring policies for employees or former employees of the independent registered public accounting firm, including but not limited to, as required by applicable laws and regulations; |
| • | setting clear policies for audit partner rotation in compliance with applicable laws and regulations; |
| • | obtaining and reviewing a report, at least annually, from the independent registered public accounting firm describing (i) the independent registered public accounting firm’s internal quality-control procedures, (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues and (iii) all relationships between the independent registered public accounting firm and us to assess the independent registered public accounting firm’s independence; |
| • | meeting to review and discuss our annual audited financial statements and quarterly financial statements with management and the independent registered public accounting firm, including reviewing our specific disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; |
| • | reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and |
| • | reviewing with management, the independent registered public accounting firm, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities. |
Compensation Committee
The members of our compensation committee are Asiff Hirji, Charles Roame and April Rudin. April Rudin serves as chairman of the compensation committee. We have adopted a compensation committee charter, which details the principal functions of the compensation committee, including:
| • | reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, if any is paid by us, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation; |
| • | reviewing and making recommendations on an annual basis to our board of directors with respect to (or approving, if such authority is so delegated by our board of directors) the compensation, if any is paid by us, and any incentive-compensation and equity-based plans that are subject to board approval of our other officers; |
| • | reviewing on an annual basis our executive compensation policies and plans; |
| • | implementing and administering our incentive compensation equity-based remuneration plans; |
| • | assisting management in complying with our proxy statement and annual report disclosure requirements; |
| • | approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees; |
| • | if required, producing a report on executive compensation to be included in our annual proxy statement; and |
| • | reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors. |
Notwithstanding the foregoing, as indicated above, until the earlier of the consummation of our initial business combination or our liquidation and the payment to our Chief Financial Officer of $350,000 per annum for his services prior to the consummation of our initial business combination, subject to the terms of a strategic services agreement and $25,000 for a subscription service to Tiburon Strategic Advisors, of which Charles Roame, one of our independent directors, is a managing partner; and in connection with potentially providing financing or other investments in connection with our initial business combination, no compensation of any kind, including finders, consulting or other similar fees, will be paid to any of our existing stockholders, officers, directors or any of their respective affiliates, prior to, or for any services they render in order to effectuate the consummation of an initial business combination. Accordingly, it is likely that prior to the consummation of an initial business combination, the compensation committee will only be responsible for the review and recommendation of any compensation arrangements to be entered into in connection with such initial business combination.
The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.
Director Nominations
We do not have a standing nominating committee, though we intend to form a corporate governance and nominating committee as and when required to do so by applicable law or stock exchange rules. In accordance with Rule 5605(e)(2) of the Nasdaq listing rules, a majority of the independent directors may recommend a director nominee for selection by the board of directors. The board of directors believes that the independent directors can satisfactorily carry out the responsibility of properly selecting or approving director nominees without the formation of a standing nominating committee. In accordance with Rule 5605(e)(1)(A) of the Nasdaq listing rules, all such directors are independent. As there is no standing nominating committee, we do not have a nominating committee charter in place.
Prior to our initial business combination, the board of directors will also consider director candidates recommended for nomination by our stockholders during such times as they are seeking proposed nominees to stand for election at an annual meeting of stockholders (or, if applicable, a special meeting of stockholders). Our stockholders that wish to nominate a director for election to the Board should follow the procedures set forth in our bylaws.
We have not formally established any specific minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our stockholders.
Compensation Committee Interlocks and Insider Participation
None of our officers currently serves, or in the past year has served, as a member of the compensation committee of any entity that has one or more officers serving on our board of directors.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics applicable to our directors, officers and employees. In addition, a copy of the Code of Business Conduct and Ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Business Conduct and Ethics in a Current Report on Form 8-K.
| Item 11. | Executive Compensation |
Other than as set forth herein, none of our officers has received any cash compensation for services rendered to us. We pay Mr. Isaacson, our Chief Financial Officer and Chief Corporate Development Officer, $350,000 per annum for his services prior to the consummation of our initial business combination and $25,000 to Tiburon Strategic Advisors, of which Charles Roame, one of our independent directors, is a managing partner. No other compensation of any kind, including any finder’s fee, reimbursement, consulting fee or monies in respect of any payment of a loan, will be paid by us to our sponsor, officers and directors, or any affiliate of our sponsor or officers, prior to, or in connection with, any services rendered in order to effectuate the consummation of our initial business combination (regardless of the type of transaction that it is). However, these individuals 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. We do not have a policy that prohibits our sponsor, officers or directors, or any of their respective affiliates, from negotiating for the reimbursement of out-of-pocket expenses by a target business. Our audit committee will review on a quarterly basis all payments that were made to our sponsor, officers or directors, or our or their 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 our reimbursement payments to our directors and officers for their out-of-pocket expenses incurred in connection with identifying and consummating an initial business combination.
After the completion of our initial business combination, directors or members of our management team who remain with us may be paid consulting or management fees from the combined company. These fees will be disclosed to stockholders in accordance with applicable rules and regulations, to the extent then known, in the tender offer materials or proxy solicitation materials furnished to our stockholders in connection with a proposed initial business combination. We have not established any limit on the amount of such fees that may be paid by the combined company to our directors or members of management. It is unlikely the amount of such compensation will be known at the time of the proposed initial business combination, because the directors of the post-combination business will be responsible for determining officer and director compensation. Any compensation to be paid to our officers will be determined, or recommended to the board of directors for determination, either by a compensation committee constituted solely by independent directors or by a majority of the independent directors on our board of directors.
We do not intend to take any action to ensure that members of our management team maintain their positions with us after the consummation of our initial business combination, although it is possible that some or all of our officers and directors may negotiate employment or consulting arrangements to remain with us after our initial business combination. The existence or terms of any such employment or consulting arrangements to retain their positions with us may influence our management team’s motivation in identifying or selecting a target business but we do not believe that the ability of our management to remain with us after the consummation of our initial business combination will be a determining factor in our decision to proceed with any potential business combination. We are not party to any agreements with our officers and directors that provide for benefits upon termination of employment.
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
The following table sets forth information regarding the beneficial ownership of our common stock as of the date of March 30, 2021 held by:
| • | each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock; |
| • | each of our officers and directors that beneficially owns shares of our common stock; and |
| • | all our officers, directors and director nominees as a group. |
The following table is based on 25,887,367 ordinary shares of outstanding at March 30, 2021, of which 20,709,894 were Class A ordinary shares and 5,177,473 were Class B ordinary shares. Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. The following table does not reflect record of beneficial ownership of the private placement warrants as those warrants are not exercisable within 60 days of March 30, 2021.
| | | Class A Common Stock | | | Class B Common Stock(2) | | | | |
Name of Beneficial Owner | | Number of Shares Beneficially Owned | | | Approximate Percentage of Class | | | Number of Shares Beneficially Owned | | | Approximate Percentage of Class | | | Approximate Percentage of Outstanding Common Stock | |
Lefteris Holdings LLC (3) | | | - | | | | - | | | | 5,087,473 | | | | 99.0 | % | | | 19.6 | % |
Mark Casady (3) | | | - | | | | - | | | | 5,087,473 | | | | 99.0 | % | | | 19.6 | % |
| Karl Roessner | | | - | | | | - | | | | - | | | | - | | | | - | |
| Jon Isaacson | | | - | | | | - | | | | - | | | | - | | | | - | |
| David Bergers | | | - | | | | - | | | | - | | | | - | | | | - | |
| Ryan Parker | | | - | | | | - | | | | - | | | | - | | | | | |
Asiff Hirjii (2) | | | - | | | | - | | | | 30,000 | | | | * | | | | * | |
Charles Roame (2) | | | - | | | | - | | | | 30,000 | | | | * | | | | * | |
April Rudin(2) | | | - | | | | - | | | | 30,000 | | | | * | | | | * | |
Linden Advisors Siu Min Wong (1) | | | 1,750,000 | | | | 8.5 | % | | | - | | | | - | | | | 6.8 | % |
Linden GP Linden Capital (1) | | | 1,582,753 | | | | 8.9 | % | | | - | | | | - | | | | 6.1 | % |
| All officers, directors and director nominees as a group (8 individuals) | | | - | | | | - | | | | 5,117,473 | | | | 100.0 | % | | | 19.8 | % |
* Less than one percent.
(1) Based on a Schedule 13G filed by Linden Capital L.P. with the SEC on February 4, 2021. Linden Advisors, Siu Min Wong, Lingen GP, and Linden Capital exercise shared voting and dispositive power over the shares. The principle address of the beneficial owner is 150 N Riverside Plaza, Suite 5100 Chicago, IL 60606.
(2) Interests shown consist solely of founder shares. Such shares will automatically convert into shares of Class A common stock at the time of our initial business combination on a one-for-one basis, subject to adjustment.
(3) Represents 5,087,473 founder shares held of record by Lefteris Holdings LLC, which is wholly owned by Lefteris Acquisition Corp.
| Item 13. | Certain Relationships and Related Transactions, and Director Independence |
In September 2020, we issued an aggregate of 5,031,250 founder shares to our sponsor for an aggregate purchase price of $25,000 in cash, or approximately $0.005 per share. On September 16, 2020, we effected a stock dividend of 1,437,500 shares with respect to our Class B common stock, resulting in our initial stockholders holding an aggregate of 6,468,750 founder shares. The number of founder shares issued was determined based on the expectation that such founder shares would represent 20% of the outstanding shares upon completion of the initial public offering. In September 2020, our sponsor transferred 20,000 founder shares to each of our independent directors. In November 2020, we consummated the sale of 709,894 additional units at a price of $10.00 per unit upon receiving notice of the underwriters’ election to partially exercise their over-allotment option, generating additional gross proceeds of $7,098,940 to the Company. Each unit consists of one share Class A common stock (the “Common Stock”) and one-third of one redeemable warrant (“Public Warrant”). As a result of the underwriters’ election to partially exercise their over-allotment option and the forfeiture of the remaining over-allotment option, 572,526 founder shares were forfeited, resulting in an aggregate of 5,177,473 founder shares outstanding. In February 2021, our sponsor transferred 10,000 to each of our independent directors, leaving a total of 5,087,473 founder shares held by the sponsor.
Our sponsor purchased, pursuant to a written agreement, an aggregate of 4,000,000 warrants at a price of $1.50 per warrant, generating gross proceeds to the Company of $6,000,000. in a private placement that occurred simultaneously with the closing of initial public offering. In connection with the Underwriter’s partial exercise of its over-allotment option, the Sponsor purchased an additional 94,653 private placement warrants. Each private placement warrant entitles the holder thereof to purchase one share of our Class A common stock at a price of $11.50 per share. The private placement warrants (including the Class A common stock issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder.
If any of our officers or directors becomes aware of an initial business combination opportunity that falls within the line of business of any entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such other entity. Our officers and directors currently have certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us.
We pay Mr. Isaacson, our Chief Financial Officer and Chief Corporate Development Officer, $350,000 per annum for his services prior to the consummation of our initial business combination, subject to the terms of a strategic services agreement that we will enter into with Mr. Isaacson prior to the consummation of the initial public offering.
We have entered into a subscription service at a cost of $25,000 per annum with Tiburon Strategic Advisors, of which Charles Roame, one of our independent directors, is a managing partner. The subscription entitles us to participate in weekly research calls and receive written research reports that we believe will be useful in our business combination research.
No compensation of any kind, including any finder’s fee, reimbursement, consulting fee or monies in respect of any payment of a loan, will be paid by us to officers or directors prior to, or in connection with, any services rendered in order to effectuate the consummation of an initial business combination (regardless of the type of transaction that it is). We do not have a policy that prohibits our sponsor, officers or directors, or any of their respective affiliates, from negotiating for the reimbursement of out-of-pocket expenses by a target business. Our audit committee will review on a quarterly basis all payments that were made to our sponsor, officers, directors or our or their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.
In addition, in order to finance transaction costs in connection with an intended initial 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. If we complete an initial business combination, we would repay such loaned amounts. In the event that the initial 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 $2,000,000 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. We do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
After our initial business combination, members of our management team who remain with us may be paid consulting, management or other fees from the combined company with any and all amounts being fully disclosed to our stockholders, to the extent then known, in the tender offer or proxy solicitation materials, as applicable, furnished to our stockholders. It is unlikely the amount of such compensation will be known at the time of distribution of such tender offer materials or at the time of a stockholder meeting held to consider our initial business combination, as applicable, as it will be up to the directors of the post-combination business to determine executive and director compensation.
We entered into a registration and stockholder rights agreement with respect to the registration for resale under the Securities Act of the private placement warrants, the warrants issuable upon conversion of working capital loans (if any) and the shares of Class A common stock issuable upon exercise of the foregoing and upon conversion of the founder shares, and, with respect to the right of our sponsor, to nominate three individuals for election to our board of directors upon consummation of our initial business combination.
Related Party Transactions Policy
We adopted a Code of Business Conduct and Ethics requiring us to avoid, wherever possible, all conflicts of interests, except under guidelines or resolutions approved by our board of directors (or the appropriate committee of our board) or as disclosed in our public filings with the SEC. Under our Code of Business Conduct and Ethics, conflict of interest situations will include any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) involving the company.
In addition, our audit committee, pursuant to a written charter that we adopted prior to the consummation of the initial public offering, is responsible for reviewing and approving related party transactions to the extent that we enter into such transactions. An affirmative vote of a majority of the members of the audit committee present at a meeting at which a quorum is present will be required in order to approve a related party transaction. A majority of the members of the entire audit committee will constitute a quorum. Without a meeting, the unanimous written consent of all of the members of the audit committee will be required to approve a related party transaction. We also require each of our directors and officers to complete a directors’ and officers’ questionnaire that elicits information about related party transactions.
These procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents a conflict of interest on the part of a director, employee or officer.
To further minimize conflicts of interest, we have agreed not to consummate an initial business combination with an entity that is affiliated with any of our sponsor, officers or directors unless we, or a committee of independent directors, have obtained an opinion from an independent investment banking firm or an independent accounting firm that our initial business combination is fair to our company from a financial point of view. No finder’s fees, reimbursements, consulting fee, monies in respect of any payment of a loan or other compensation will be paid by us to our sponsor, officers or directors, or any affiliate of our sponsor or officers, for services rendered to us prior to, or in connection with, any services rendered in order to effectuate the consummation of our initial business combination (regardless of the type of transaction that it is). However, the following payments will be made to our sponsor, officers or directors, or our or their affiliates, none of which will be made from the proceeds of the initial public offering held in the trust account prior to the completion of our initial business combination:
| • | Repayment of a loan of up to an aggregate of $250,000 made to us by our sponsor to cover offering related and organizational expenses; |
| • | Reimbursement for any out-of-pocket expenses related to identifying, investigating and completing an initial business combination; |
| • | Payment to our Chief Financial Officer of $350,000 per annum for his services prior to the consummation of our initial business combination, subject to the terms of a strategic services agreement that we will enter into with Mr. Isaacson prior to the consummation of the initial public offering; |
| • | Payment of $25,000 per annum for a subscription service with Tiburon Strategic Advisors, of which Charles Roame, one of our independent directors, is a managing partner. The subscription entitles us to participate in weekly research calls and receive written research reports that we believe will be useful in our business combination research; and |
| • | Repayment of loans which may be made by our sponsor or an affiliate of our sponsor or certain of our officers and directors to finance transaction costs in connection with an intended initial business combination, the terms of which have not been determined nor have any written agreements been executed with respect thereto. Up to $2,000,000 of such loans may be convertible into warrants, at a price of $1.50 per warrant at the option of the lender. |
Our audit committee will review on a quarterly basis all payments that were made to our sponsor, officers or directors, or our or their affiliates.
| Item 14. | Principal Accountant Fees and Services |
The firm of WithumSmith+Brown, PC, or Withum, acts as our independent registered public accounting firm. The following is a summary of fees paid to Withum for services rendered.
Audit Fees. During the period from August 20, 2020 (inception) through December 31, 2020, fees for our independent registered public accounting firm were approximately $68,495 for the services Withum performed in connection with our initial public offering and the audit of our December 31, 2020 financial statements included in this Form 10-K.
Audit-Related Fees. During the period from August 20, 2020 (inception) through December 31, 2020, our independent registered public accounting firm did not render assurance and related services related to the performance of the audit or review of financial statements.
Tax Fees. During the period from August 20, 2020 (inception) through December 31, 2020, our independent registered public accounting firm did not render services to us for tax compliance, tax advice and tax planning.
All Other Fees. During the period from August 20, 2020 (inception) through August 20, 2020, there were no fees billed for products and services provided by our independent registered public accounting firm other than those set forth above.
Pre-Approval Policy
Our audit committee was formed upon the consummation of our Initial Public Offering. As a result, the audit committee did not pre-approve all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our board of directors. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing services and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of the audit).
| Item 15. | Exhibits and Financial Statement Schedules |
| (a) | The following documents are filed as part of this Form 10-K/A: |
| | Page |
| Report of Independent Registered Public Accounting Firm | F-2 |
| Balance Sheet (Restated) | F-3 |
| Statement of Operations (Restated) | F-4 |
| Statement of Changes in Stockholders’ Equity (Restated) | F-5 |
| Statement of Cash Flows (Restated) | F-6 |
| Notes to Financial Statements (Restated) | F-7 |
| (2) | Financial Statement Schedules: |
None.
We hereby file as part of this Report the exhibits listed in the attached Exhibit Index. Exhibits which are incorporated herein by reference can be inspected and copied at the public reference facilities maintained by the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Copies of such material can also be obtained from the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates or on the SEC website at www.sec.gov.
Exhibit number | | Description of Exhibit |
| | Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on October 26, 2020 (File No. 001-39636) |
| | | |
| | Bylaws (incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form S-1, filed on October 2, 2020 (File No. 333-249290)) |
| | | |
| | Warrant Agreement, dated October 20, 2020, between Continental Stock Transfer & Trust Company and the Company (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on October 26, 2020 (File No. 001-39636) |
| | | |
| | Specimen Unit Certificate (incorporated by reference to Exhibit 4.1 to the Company’s amended Form S-1, filed on October 13, 2020 (File No. 333-249290)) |
| | | |
| | Specimen Class A Common Stock Certificate (incorporated by reference to Exhibit 4.2 to the Company’s amended Form S-1, filed on October 13, 2020 (File No. 333-249290)) |
| | | |
| | Description of Registrant’s Securities |
| | Warrant Purchase Agreement, dated October 20, 2020, between the Company and Lefteris Holdings LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on October 26, 2020 (File No. 001-39636)) |
| | | |
| | Investment Management Trust Account Agreement, dated October 20, 2020, between Continental Stock Transfer & Trust Company and the Company (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on October 26, 2020 (File No. 001-39636) |
| | | |
| | Registration and Stockholder Right Agreement, dated October 20, 2020, between the Company and certain security holders (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on October 26, 2020 (File No. 001-39636)) |
| | | |
| | Letter Agreement, dated October 20, 2020, between the Company, Lefteris Holdings LLC, each of the officers and directors of the Company (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed on October 26, 2020 (File No. 001-39636)) |
| | | |
| | Form of Indemnity Agreement, dated October 20, 2020, between the Company and each of the officers and directors of the Company (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed on October 26, 2020 (File No. 001-39636)) |
| | | |
| | Code of Business Conduct and Ethics |
| | | |
| | Power of Attorney (included on signature page) |
| | | |
| | Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| | | |
| | Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| | | |
| | 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. |
| | | |
| | 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 | | Interactive Data File |
| Item 16. | Form 10-K Summary |
None.
Pursuant to the requirements of Section 13 or 15(d) 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 on this 6th day of July 2021.
| | By: | /s/ Karl Roessner | |
| | | Name: Karl Roessner | |
| | | Title: Chief Executive Officer |
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Karl Roessner and Jon Isaacson, and each of them acting individually, as his or her true and lawful attorneys-in-fact and agents, each with full power of substitution, for him or her in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K/A, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, with full power of each to act alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant in the capacities and on the dates indicated.
| Signature | | Title | | Date |
| | | | | |
| /s/ Mark Casady | | Chairman of the Board of Directors | | July 6, 2021 |
| Mark Casady | | | | |
| | | | | |
| /s/ Karl Roessner | | Chief Executive Officer and Director (Principal Executive Officer) | | |
| Karl Roessner | | | | |
| | | | | |
| /s/ Jon Isaacson | | Chief Financial Officer and Chief Corporate Development Officer (Principal Financial Officer and Principal Accounting Officer) | | |
| Jon Isaacson | | | | |
| | | | | |
| /s/ David Bergers | | General Counsel | | |
| David Bergers | | | | |
| | | | | |
| /s/ Ryan Parker | | Vice Chairman | | |
| Ryan Parker | | | | |
| | | | | |
| /s/ April Rudin | | Director | | |
| April Rudin | | | | |
| | | | | |
| /s/ Asiff Hirji | | Director | | |
| Asiff Hirji | | | | |
| | | | | |
| /s/ Charles Roame | | Director | | |
| Charles Roame | | | | |
LEFTERIS ACQUISITION CORP.
TABLE OF CONTENTS
| F-2 |
| Financial Statements: | |
| | | F-3 |
| | | F-4 |
| | | F-5 |
| | | F-6 |
| | | F-7 to F-21 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of
Lefteris Acquisition Corp.
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Lefteris Acquisition Corp. (the “Company”) as of December 31, 2020, the related statements of operations, changes in stockholders’ equity and cash flows for the period from August 20, 2020 (inception) through December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the period from August 20, 2020 (inception) through December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Restatement of Financial Statements
As discussed in Note 2 to the financial statements, the Securities and Exchange Commission issued a public statement entitled Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) (the “SEC Staff Statement”) on April 12, 2021, which discusses the accounting for certain warrants as liabilities. The Company previously accounted for its warrants as equity instruments. Management evaluated its warrants against the SEC Staff Statement, and determined that the warrants should be accounted for as liabilities. Accordingly, the 2020 financial statements have been restated to correct the accounting and related disclosure for the warrants.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
| /s/ WithumSmith+Brown, PC | |
We have served as the Company’s auditor since 2020.
New York, New York
LEFTERIS ACQUISITION CORP.
DECEMBER 31, 2020 (AS RESTATED)
| ASSETS | | | |
| Current assets | | | |
| Cash | | $ | 1,017,569 | |
| Due from Sponsor | | | 141,979 | |
| Prepaid expenses | | | 416,800 | |
| Total Current Assets | | | 1,576,348 | |
| | | | | |
| Cash and Investments held in Trust Account | | | 207,128,528 | |
| Total Assets | | $ | 208,704,876 | |
| | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | |
| Current liabilities | | | | |
| Accrued expenses | | $ | 520,828 | |
| Accrued offering costs | | | 48,475 | |
| Advances — related party | | | 170,337 | |
| Total Current Liabilities | | | 739,640 | |
| | | | | |
| Warrant liability | | | 23,890,377 | |
| Deferred underwriting fee payable | | | 7,248,463 | |
| Total Liabilities | | | 31,878,480 | |
| | | | | |
| Commitments and contingencies | | | | |
| | | | | |
| Class A common stock subject to possible redemption, 17,182,639 shares at $10.00 per share redemption value | | | 171,826,390 | |
| | | | | |
| Stockholders’ Equity | | | | |
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding | | | — | |
| Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 3,527,255 issued and outstanding (excluding 17,182,639 shares subject to possible redemption) | | | 353 | |
| Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 5,177,473 shares issued and outstanding | | | 518 | |
| Additional paid-in capital | | | 17,873,488 | |
| Accumulated deficit | | | (12,874,353 | ) |
| Total Stockholders’ Equity | | | 5,000,006 | |
| Total Liabilities and Stockholders’ Equity | | $ | 208,704,876 | |
The accompanying notes are an integral part of the financial statements.
LEFTERIS ACQUISITION CORP.
FOR THE PERIOD FROM AUGUST 20, 2020 (INCEPTION) THROUGH DECEMBER 31, 2020 (AS RESTATED)
| General and administrative expenses | | $ | 770,470 | |
| Loss from operations | | | (770,470 | ) |
| | | | | |
| Other income (expense): | | | | |
| Interest earned on investments held in Trust Account | | | 29,588 | |
| Change in fair value of warrant liability | | | (11,690,720 | ) |
| Transaction costs associated with private warrants | | | (442,751 | ) |
| Net loss | | $ | (12,874,353 | ) |
| | | | | |
| Weighted average shares outstanding of Class A common stock subject to possible redemption | | | 20,459,343 | |
| Basic and diluted loss per share, Class A common stock subject to possible redemption | | $ | 0.00 |
|
| | | | | |
| Weighted average shares outstanding of Class A and Class B non-redeemable common stock | | | 5,059,158 | |
| Basic and diluted net loss per share, Class A and Class B non-redeemable common stock | | $ | (2.54 | )
|
The accompanying notes are an integral part of the financial statements.
LEFTERIS ACQUISITION CORP.
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE PERIOD FROM AUGUST 20, 2020 (INCEPTION) THROUGH DECEMBER 31, 2020 (AS RESTATED)
| | | Class A Common Stock | | | Class B Common Stock | | | Additional Paid-in | | | Accumulated | | | Total Stockholders’ | |
| | | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Deficit | | | Equity | |
| Balance – August 20, 2020 (Inception) | | | — | | | $ | — | | | | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Issuance of Class B common stock to Sponsor | | | — | | | | — | | | | 5,750,000 | | | | 575 | | | | 24,425 | | | | — | | | | 25,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Sale of 20,709,894 Units, net of underwriting discounts, offering costs, and fair value of public warrants | | | 20,709,894 | | | | 2,071 | | | | — | | | | — | | | | | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Contribution in excess of fair value of warrant liability upon sale of Private Placement Warrants | | | — | | | | — | | | | — | | | | — | | | | | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Forfeiture of Founder Shares | | | — | | | | — | | | | (572,526 | ) | | | (57 | ) | | | 57 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class A common stock subject to possible redemption | | | (17,182,639 | ) | | | (1,718 | ) | | | — | | | | — | | | | (171,824,672 | ) | | | — | | | | (171,826,390 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net loss | | | — | | | | — | | | | — | | | | — | | | | — | | | | (12,874,353 | ) | | | (12,874,353 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance – December 31, 2020 | | | 3,527,255 | | | $ | 353 | | | | 5,177,473 | | | $ | 518 | | | $ | 17,873,488 | | | $ | (12,874,353 | ) | | $ | 5,000,006 | |
The accompanying notes are an integral part of the financial statements.
LEFTERIS ACQUISITION CORP.
FOR THE PERIOD FROM AUGUST 20, 2020 (INCEPTION) THROUGH DECEMBER 31, 2020 (AS RESTATED)
| Cash Flows from Operating Activities: | | | |
| Net loss | | $ | (12,874,353 | ) |
| Transaction costs associated with private warrants | | | 442,751 | |
| Change in fair value of warrant liability | | | 11,690,720 | |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | |
| Interest earned on investments held in Trust Account | | | (29,588 | ) |
| Changes in operating assets and liabilities: | | | | |
| Prepaid expenses | | | (416,800 | ) |
| Accrued expenses | | | 520,828 | |
| Net cash used in operating activities | | | | ) |
| | | | | |
| Cash Flows from Investing Activities: | | | | |
| Investment of cash into Trust Account | | | (207,098,940 | ) |
| Net cash used in investing activities | | | (207,098,940 | ) |
| | | | | |
| Cash Flows from Financing Activities: | | | | |
Due from sponsor | | | (141,979 | )
|
| Proceeds from sale of Units, net of underwriting discounts paid | | | 202,956,961 | |
| Proceeds from sale of Private Placement Warrants | | | 6,141,979 | |
| Proceeds from issuance of Class B common stock to Sponsor | | | 25,000 | |
| Proceeds from advances – related party | | | 169,737 | |
| Payment of offering costs | | | (368,747 | ) |
| Net cash provided by financing activities | | | | |
| | | | | |
| Net Change in Cash | | | 1,017,569 | |
| Cash – Beginning of period | | | — | |
| Cash – End of period | | $ | 1,017,569 | |
| | | | | |
| Non-Cash Financing Activities: | | | | |
| Initial classification of Class A common stock subject to possible redemption | | $ | | |
| Change in value of Class A common stock subject to possible redemption | | $ | | ) |
| Offering costs included in accrued offering costs | | $ | 48,475 | |
| Offering costs paid through advances – related party | | $ | 600 | |
| Deferred underwriting fee payable | | $ | 7,248,463 | |
| Forfeiture of Founder Shares | | $ | (57 | ) |
The accompanying notes are an integral part of the financial statements.
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Lefteris Acquisition Corp. (the “Company”) was incorporated in Delaware on August 20, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).
The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of December 31, 2020, the Company had not commenced any operations. All activity for the period from August 20, 2020 (inception) through December 31, 2020 relates to the Company’s formation and the initial public offering (“Initial Public Offering”), which is described below. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering. The Company has selected December 31 to be its fiscal year end.
The registration statement for the Company’s Initial Public Offering was declared effective on October 20, 2020. On October 23, 2020 the Company consummated the Initial Public Offering of 20,000,000 units (the “Units” and, with respect to the Class A common stock included in the Units sold, the “Public Shares”) at $10.00 per Unit, generating gross proceeds of $200,000,000 which is described in Note 4.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 4,000,000 warrants (the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant in a private placement to Lefteris Holdings, LLC (the “Sponsor”), generating gross proceeds of $6,000,000, which is described in Note 5.
Following the closing of the Initial Public Offering on October 23, 2020, an amount of $200,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”), located in the United States and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting certain conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account, as described below.
On November 17, 2020, the Company consummated the sale of an additional 709,894 Units through the underwriters’ election to partially exercise their over-allotment option, at $10.00 per Unit, and the sale of an additional 94,653 Private Placement Warrants, at $1.50 per Private Warrant, generating total gross proceeds of $7,240,919. A total of $7,098,940 of the net proceeds was deposited into the Trust Account, bringing the aggregate proceeds held in the Trust Account to $207,098,940.
Transaction costs amounted to $11,808,264, consisting of $4,141,979 in cash underwriting fees, $7,248,463 of deferred underwriting fees and $417,822 of other offering costs. Transaction costs charged to equity amounted to $11,365,513. Transactions costs expensed as of the date of the Initial Public Offering totaled $442,751.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the Trust Account). The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act.
The Company will provide the holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per Public Share, plus any pro rata interest then in the Trust Account, net of taxes payable). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
The Company will only proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 following any related redemptions and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 6) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.
Notwithstanding the foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Certificate of Incorporation will provide that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the 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% of the Public Shares, without the prior consent of the Company.
The Sponsor has agreed (a) to waive its redemption rights with respect to the Founder Shares and Public Shares held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemptions in connection with a Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined below) or (ii) with respect to any other provision relating to stockholders’ rights or pre-business combination activity, unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
The Company will have until October 23, 2022 to complete a Business Combination (the “Combination Period”). If the Company has not completed a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to pay taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
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 7) 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 transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per public Share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to monies held in the Trust Account nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except for the Company’s independent registered public accounting firm), prospective target businesses and other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Liquidity and Capital Resources
As of December 31, 2020, the Company had approximately $1,017,569 in its operating bank account and working capital of approximately $836,708. Prior to the completion of the Initial Public Offering, the Company’s liquidity needs had been satisfied through the payment of $25,000 from the Sponsor to cover certain expenses in exchange for the issuance of the Founder Shares (as defined in Note 6), a advances from related party of approximately $170,000 (Note 6). Subsequent to the consummation of the Initial Public Offering and Private Placement, the Company’s liquidity needs have been satisfied with the proceeds from the consummation of the Private Placement not held in the Trust Account. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor may, but is not obligated to, provide the Company Working Capital Loans (see Note 6). As of December 31, 2020, there were no amounts outstanding under any Working Capital Loan. Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity from the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
NOTE 2 — RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
The Company previously accounted for its outstanding Public Warrants (as defined in Note 4) and Private Placement Warrants (collectively, with the Public Warrants, the “Warrants”) issued in connection with its Initial Public Offering as components of equity instead of as derivative liabilities. The warrant agreement governing the Warrants includes a provision that provides for potential changes to the settlement amounts dependent upon the characteristics of the holder of the warrant. In Addition, the warrant agreement includes a provision that in the event of a tender offer or exchange offer made to and accepted by holders of more than 50% of the outstanding shares of a single class of stock, all holders of the Warrants would be entitled to receive cash for their Warrants (the “tender offer provision”).
On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the Securities and Exchange Commission together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). Specifically, the SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement (the “Warrant Agreement”).
In further consideration of the SEC Statement, the Company’s management further evaluated the Warrants under Accounting Standards Codification (“ASC”) Subtopic 815-40, Contracts in Entity’s Own Equity. ASC Section 815-40-15 addresses equity versus liability treatment and classification of equity-linked financial instruments, including warrants, and states that a warrant may be classified as a component of equity only if, among other things, the warrant is indexed to the issuer’s common stock. Under ASC Section 815-40-15, a warrant is not indexed to the issuer’s common stock if the terms of the warrant require an adjustment to the exercise price upon a specified event and that event is not an input to the fair value of the warrant. Based on management’s evaluation, the Company’s audit committee, in consultation with management, concluded that the Company’s Private Placement Warrants are not indexed to the Company’s common stock in the manner contemplated by ASC Section 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares. In addition, based on management’s evaluation, the Company’s audit committee, in consultation with management, concluded that the tender offer provision fails the “classified in stockholders’ equity” criteria as contemplated by ASC Section 815-40-25.
As a result of the above, the Company should have classified the Warrants as derivative liabilities in its previously issued financial statements. Under this accounting treatment, the Company is required to measure the fair value of the Warrants at the end of each reporting period as well as re-evaluate the treatment of the warrants (including on October 23, 2020 and December 31, 2020) and recognize changes in the fair value from the prior period in the Company’s operating results for the current period.
The Company’s accounting for the Warrants as components of equity instead of as derivative liabilities did not have any effect on the Company’s previously reported investments held in trust, operating expenses, cash flows or cash.
| | | Previously Reported | | | Adjustments | | | As Restated | |
| | | | | | | | | | |
| Balance sheet as of October 23, 2020 (audited) | | | | | | | | | |
| Total Liabilities | | $ | 7,572,832 | | | $ | 11,832,666 | | | $ | 19,405,498 | |
| Class A Common Shares Subject to Possible Redemption | | | 189,532,010 | | | | (11,832,666 | ) | | | 177,699,344 | |
| Class A Common Shares | | | 105 | | | | 118 | | | | 223 | |
| Additional Paid-in Capital | | | 5,074,488 | | | | 428,279 | | | | 5,502,767 | |
| Accumulated Deficit | | | (75,162 | ) | | | (428,397 | ) | | | (503,559 | ) |
| | | | | | | | | | | | | |
| Number of Class A common shares subject to possible redemption | | | 18,953,201 | | | | (1,183,267 | ) | | | 17,769,934 | |
| | | | | | | | | | | | | |
| Balance sheet as of December 31, 2020 (audited) | | | | | | | | | | | | |
| Total Liabilities | | $ | 7,988,103 | | | $ | 23,890,377 | | | $ | 31,878,480 | |
| Common Shares Subject to Possible Redemption | | | 195,716,770 | | | | (23,890,380 | ) | | | 171,826,390 | |
| Class A Common Shares | | | 114 | | | | 239 | | | | 353 | |
| Additional Paid-in Capital | | | 5,740,253 | | | | 12,133,235 | | | | 17,873,488 | |
| Accumulated Deficit | | | (740,882 | ) | | | (12,133,471 | ) | | | (12,874,353 | ) |
| Shareholders’ Equity | | | 5,000,003 | | | | 3
| | | | 5,000,006 | |
| | | | | | | | | | | | | |
| Number of Class A common shares subject to possible redemption | | | 19,571,677 | | | | (2,389,038 | ) | | | 17,182,639 | |
| | | | | | | | | | | | | |
| Statement of Operations for period from August 20, 2020 (inception) to December 31, 2020 (audited) | | | | | | | | | | | | |
| Net loss | | | (740,882 | ) | | | (12,133,471 | ) | | | (12,874,353 | ) |
| Weighted average shares outstanding of Class A common shares subject to possible redemption | | | | | | | - | | | | | |
| Basic and diluted net loss per share, Class A | | | (0.00 | ) | | | - |
| | | (0.00 | ) |
| Weighted average shares outstanding of Class B non-redeemable common shares | | | 5,059,158 | | | | -
| | | | | |
| Basic and diluted net loss per share, Class B | | | (0.15 | ) | | | - | | | | (2.54 | ) |
| | | | | | | | | | | | | |
| Statement of Cash Flows for period from August 20, 2020 (inception) to December 31, 2020 (audited) | | | | | | | | | | | | |
| Net loss | | | (740,882 | ) | | | (12,133,471 | ) | | | (12,874,353 | ) |
| Change in fair value of warrant liability | | | - | | | | 11,690,720 | | | | 11,690,720 | |
| Change in value of Class A common shares subject to redemption | | | (665,720 | ) | | | (23,890,380 | ) | | | (24,556,100 | ) |
| Transaction costs associated with private warrants | | | | | | | | | | | 442,751 | |
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements are presented in U.S. dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the accounting and disclosure rules and regulations of the Securities and Exchange Commission (the “SEC”).
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statement, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant estimates included in these financial statements is the determination of the fair value of the warrant liability. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents at December 31, 2020.
Investments Held in Trust Account
The Company’s portfolio of investments held in the Trust Account is comprised of cash and 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.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
Offering Costs
Offering costs consist of legal, accounting and other expenses incurred through the balance sheet date that are directly related to the Initial Public Offering. Offering costs amounting to $11,365,513 were charged to stockholders’ equity and $442,751 were charged to operations upon the completion of the Initial Public Offering (see Note 1).
Warrant Liability
The Company accounts for the Warrants in accordance with the guidance contained in ASC 815-40 under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Warrants as liabilities at their fair value and adjust the Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. The Private Warrants and the Public Warrants for periods where no observable traded price was available are valued using a Black-Scholes Model. For periods subsequent to the detachment of the Public Warrants from the Units, the Public Warrant quoted market price was used as the fair value as of each relevant date.
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 statements 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. The Company’s deferred tax assets were deemed to be de minimis as of December 31, 2020.
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 unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
The provision for income taxes was deemed to be de minimis for the period from August 20, 2020 (inception) through December 31, 2020.
Net Loss per Common Share
Net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. The Company has not considered the effect of warrants sold in the Initial Public Offering and private placement to purchase 10,997,951 shares of Class A common stock in the calculation of diluted income per share, since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
The Company’s statement of operations includes a presentation of loss per share for common shares subject to possible redemption in a manner similar to the two-class method of loss per share. Net income per common share, basic and diluted, for Class A redeemable common stock is calculated by dividing the interest income earned on the Trust Account, by the weighted average number of Class A redeemable common stock outstanding since original issuance. Net loss per share, basic and diluted, for Class B non-redeemable common stock is calculated by dividing the net loss, adjusted for income attributable to Class A redeemable common stock, net of applicable franchise and income taxes, by the weighted average number of Class B non-redeemable common stock outstanding for the period. Class B non-redeemable common stock includes the Founder Shares as these shares do not have any redemption features and do not participate in the income earned on the Trust Account.
The following table reflects the calculation of basic and diluted net loss per common share (in dollars, except per share amounts):
| | | For the Period From August 20, 2020 (inception) Through December 31, | |
| | | 2020 | |
| Redeemable Class A Common Stock | | | |
| Numerator: Earnings allocable to Redeemable Class A Common Stock | | | |
| Interest Income | | $ | 29,588 | |
| Income and Franchise Tax | | | (29,588 | ) |
| Net Earnings | | $ | — | |
| Denominator: Weighted Average Class A Common Stock Subject to Possible Redemption | | | | |
| Redeemable Class A Common Stock, Basic and Diluted | | | 20,459,343 | |
| Earnings/Basic and Diluted Class A Common Stock Subject to Possible Redemption | | $ | — | |
| | | | | |
| Non-Redeemable Class A and B Common Stock | | | | |
| Numerator: Net Loss minus Redeemable Net Earnings | | | | |
| Net Loss | | $ | (12,874,353 | )
|
| Redeemable Net Loss | | | — | |
| Non-Redeemable Net Loss | | $ | (12,874,353 | )
|
| Denominator: Weighted Average Non-Redeemable Class A and B Common Stock | | | | |
| Non-Redeemable Class A and B Common Stock, Basic and Diluted | | | 5,059,158 | |
| Loss/Basic and Diluted Non-Redeemable Class A and B Common Stock | | $ | (2.54 | )
|
As of December 31, 2020, basic and diluted shares are the same as there are no non-redeemable securities that are dilutive to the Company’s stockholders.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, excluding the warrant liability, which qualify as financial instruments under ASC 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
• Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
• Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
• Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-06, Debt -- Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging -- Contracts in Entity's Own Equity (Subtopic 815-40) ("ASU 2020-06") to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity's own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity's own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company adopted ASU 2020-06 effective January 1, 2021.
Management does not believe that other any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
NOTE 4. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold 20,709,894 Units, at a price of $10.00 per Unit, inclusive of 709,894 Units sold to the underwriters on November 17, 2020 upon the underwriters’ election to partially exercise their over-allotment option. Each Unit consists of one share of Class A common stock and one-third of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 9).
NOTE 5. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 4,000,000 Private Placement Warrants at a price of $1.50 per Private Placement Warrant, generating proceeds of $6,000,000 in the aggregate. On November 17, 2020, in connection with the underwriters’ election to partially exercise their over-allotment option, the Company sold an additional 94,653 Private Placement Warrants to the Sponsor, at a price of $1.50 per Private Placement Warrant, generating gross proceeds of $141,979. This amount is reflected on the Company’s balance sheet as of December 31, 2020 as a Due from Sponsor and was paid on March 23, 2021. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 9). The proceeds from the sale of the Private Placement Warrants were added to the net proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.
NOTE 6. RELATED PARTY TRANSACTIONS
Founder Shares
During the period ended September 4, 2020, the Sponsor purchased 5,031,250 shares (the “Founder Shares”) of the Company’s Class B common stock for an aggregate price of $25,000. On September 16, 2020, the Company effected a stock dividend resulting in 6,468,750 Founder Shares being issued and outstanding. On October 20, 2020, the Company canceled 718,750 Founder Shares, resulting in an aggregate of 5,750,000 Founder Shares being issued and outstanding. In September 2020, the Sponsor transferred 20,000 Founder Shares to each of the Company’s independent directors. The Founder Shares include an aggregate of up to 750,000 shares subject to forfeiture to the extent that the underwriters’ over-allotment is not exercised in full or in part, so that the number of Founder Shares will equal, on an as-converted basis, approximately 20% of the Company’s issued and outstanding common stock after the Initial Public Offering. All share and per-share amounts have been retroactively restated to reflect the share transactions. As a result of the underwriters’ election to partially exercise their over-allotment option on November 17, 2020, a total of 177,473 Founder Shares are no longer subject to forfeiture and 572,527 Founder Shares were forfeited, resulting in an aggregate of 5,177,473 Founder Shares issued and outstanding.
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Public Stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Promissory Note — Related Party
On August 28, 2020, the Sponsor issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to which the Company could borrow up to an aggregate principal amount of $250,000. The Promissory Note is non-interest bearing and payable on the earlier of (i) March 31, 2021 or (ii) the consummation of the Initial Public Offering. As of December 31, 2020, there was no amounts outstanding under the Promissory Note.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $2,000,000 of such Working Capital Loans may be convertible into warrants of the post-Business Combination entity at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants. At December 31, 2020, no such Working Capital Loans were outstanding.
NOTE 7. COMMITMENTS AND CONTINGENCIES
Risks and Uncertainties
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 financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Registration and Stockholder Rights
Pursuant to a registration rights agreement entered into on October 20, 2020, the holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration rights pursuant to a registration and stockholder rights agreement requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to the Company’s Class A common stock). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the 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. The registration rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering our securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $7,248,463 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.
NOTE 8. STOCKHOLDERS’ EQUITY
Preferred Stock — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At December 31, 2020, there were no shares of preferred stock issued or outstanding.
Class A Common Stock — The Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of Class A common stock are entitled to one vote for each share. At December 31, 2020, there were 3,527,255 shares of Class A common stock issued or outstanding, excluding 17,182,639 Class A common shares subject to possible redemption.
Class B Common Stock — The Company is authorized to issue 10,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of Class B common stock are entitled to one vote for each share. At December 31, 2020, there were 5,177,473 shares of Class B common stock issued and outstanding.
Holders of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of our stockholders except as otherwise required by law.
The shares of Class B common stock will automatically convert into Class A common stock concurrently with or immediately following the consummation of a Business Combination on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in 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 as-converted basis, 20% of the sum of (i) the total number of all shares of common stock outstanding upon completion of the Initial Public Offering, plus (ii) all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with a Business Combination (excluding any shares of Class A common stock 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). The Company cannot determine at this time whether a majority of the holders of our Class B common stock at the time of any future issuance would agree to waive such adjustment to the conversion ratio.
NOTE 9. WARRANT LIABILITY
Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, the Company will use its commercially reasonable efforts to file with the SEC a 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 60 business days after the closing of a Business Combination and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of a Business Combination, 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.
Redemptions of warrants when the price of Class A common stock equals or exceeds $18.00 — Once the warrants become exercisable, the Company may redeem the Public Warrants:
| | ● | in whole and not in part; |
| | ● | at a price of $0.01 per warrant; |
| | ● | upon not less than 30 days’ prior written notice of redemption, or the 30-day redemption period, to each warrant holder; and |
| | ● | if, and only if, the reported last sale price of the Company’s Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders. |
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Redemption of warrants when the price per share of Class common stock equals or exceeds $10.00 — Commencing ninety days after the warrants become exercisable, the Company may redeem the outstanding Public Warrants:
| | ● | in whole and not in part; |
| | ● | at a price of $0.10 per warrant provided that holders will be able to exercise their warrants prior to redemption and receive that number of shares of Class A common stock determined based on the redemption date and the “fair market value” of the Company’s Class A common stock; |
| | ● | upon a minimum of 30 days’ prior written notice of redemption; |
| | ● | if, and only if, the last reported sale price of the Company’s Class A common stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) on the trading day prior to the date on which the Company sends the notice of redemption to the warrant holders; |
| | ● | if, and only if, there is an effective registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and a current prospectus relating thereto is available throughout the 30-day period after the written notice of redemption is given. |
If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of the Company’s initial business combination, warrant holders may, until such time as there is an effective registration statement, exercise warrants on a cashless basis. 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, except as described below, the warrants will not be adjusted for issuance of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the 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 (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 $10.00 and $18.00 per share redemption trigger prices will be adjusted (to the nearest cent) to be equal to 100% and 180% of the higher of the Market Value and the Newly Issued Price, respectively.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
NOTE 10. INCOME TAX
The Company’s net deferred tax assets are as follows:
| | | December 31, 2020 | |
| Deferred tax asset | | | |
| Net operating loss carryforward | | $ | 8,486 | |
| Organizational costs/Startup expenses | | | 147,099 | |
| Total deferred tax asset | | | 155,585 | |
| Valuation allowance | | | (155,585 | ) |
| Deferred tax asset, net of allowance | | $ | — | |
The income tax provision consists of the following:
| | | December 31, 2020 | |
| Federal | | | |
| Current | | $ | — | |
| Deferred | | | (155,585 | ) |
| | | | | |
| State | | | | |
| Current | | $ | — | |
| Deferred | | | — | |
| Change in valuation allowance | | | 155,585 | |
| Income tax provision | | $ | — | |
As of December 31, 2020, the Company had a U.S. federal net operating loss carryover of approximately $40,000 available to offset future taxable income.
In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. For the period from August 20, 2020 (inception) through December 31, 2020, the change in the valuation allowance was $155,585.
A reconciliation of the federal income tax rate to the Company’s effective tax rate at December 31, 2020 is as follows:
| | | December 31, 2020 | |
| | | | |
| Statutory federal income tax rate | | | 21.0 | % |
| State taxes, net of federal tax benefit | | | 0.0 | % |
| Change in fair value of warrant liability | | | (19.8 | )% |
| Change in valuation allowance | | | (1.2 | )% |
| Income tax provision | | | 0.0 | % |
The Company files income tax returns in the U.S. federal jurisdiction in various state and local jurisdictions and is subject to examination by the various taxing authorities.
NOTE 11. FAIR VALUE MEASUREMENTS
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| | Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| | Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
| | Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
The Company classifies its U.S. Treasury and equivalent securities as held-to-maturity in accordance with ASC Topic 320 “Investments - Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost on the accompanying balance sheets and adjusted for the amortization or accretion of premiums or discounts.
At December 31, 2020, assets held in the Trust Account were comprised of $628 in cash and $207,127,900 in U.S. Treasury securities. During the year ended December 31, 2020, the Company did not withdraw any interest income from the Trust Account.
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at December 31, 2020 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value. The gross holding gains and fair value of held-to-maturity securities at December 31, 2020 are as follows:
| | Held-To-Maturity | | Level | | | Amortized Cost | | | Gross Holding Gain | | | Fair Value | |
| December 31, 2020 | | U.S. Treasury Securities (Mature on 2/18/2021) | | | 1 | | | $ | 207,127,900 | | | $ | 5,527 | | | $ | 207,133,427 | |
Transfers to/from Levels 1, 2, and 3 are recognized at the end of the 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 December 31, 2020 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
| | Level | | | December 31, 2020 | |
| Assets: | | | | | | |
| Cash and marketable securities held in Trust Account | | | 1 | | | $ | 207,128,528 | |
| | | | | | | | | |
| Liabilities: | | | | | | | | |
| Warrant Liability – Public Warrants | | | 1 | | | $ | 14,704,023 | |
| Warrant Liability – Private Placement Warrants | | | 3 | | | $ | 9,186,354 | |
The Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on our balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the statement of operations.
The Private Warrants were initially valued using a Modified Black Scholes Option Pricing Model, which is considered to be a Level 3 fair value measurement. The Modified Black Scholes model’s primary unobservable input utilized in determining the fair value of the Private Warrants is the expected volatility of the common stock. The expected volatility as of the IPO date was derived from observable public warrant pricing on comparable ‘blank-check’ companies without an identified target. The expected volatility as of subsequent valuation dates was implied from the Company’s own public warrant pricing. A Monte Carlo simulation methodology was used in estimating the fair value of the public warrants for periods where no observable traded price was available, using the same expected volatility as was used in measuring the fair value of the Private Warrants. For periods subsequent to the detachment of the warrants from the Units, the close price of the public warrant price was used as the fair value as of each relevant date.
The following table provides quantitative information regarding Level 3 fair value measurements at October 23, 2020 (Initial Measurement) and December 31, 2020 (Private Placement Warrants only):
| | | At
October 23,
2020 (Initial Measurement) | | | As of
December 31,
2020 | |
| Stock price | | $ | 9.52 | | | $ | 10.35 | |
| Strike price | | $ | 11.50 | | | $ | 11.50 | |
| Volatility | | | 10.0 | % | | | 10.0 | % |
| Risk-free rate | | | 0.46 | % | | | 0.46 | % |
| Time until Business Combination occurring (years) | | | 0.75 | | | | 0.66 | |
| Dividend yield | | | 0.0 | % | | | 0.0 | % |
The following table presents the changes in the fair value of warrant liabilities:
| | | Private Placement | | | Public | | | Warrant Liabilities | |
| Fair value as of August 20, 2020 (inception) | | $ | — | | | $ | — | | | $ | — | |
| Initial measurement on October 23, 2020 (including overallotment) | | | | | | | 7,613,646 | | | | | |
| Change in fair value | | | | | | | | | | | | |
| Fair value as of December 31, 2020 | | $ | 9,186,354 | | | $ | 14,704,023 | | | $ | 23,890,377 | |
The following table presents the changes in the fair value of Level 3 warrant liabilities:
| Fair value as of August 20, 2020 | | $ | — | |
| Initial measurement on October 23, 2020 (Initial Public Offering) | | | 12,199,657 | |
| Transfer out of Level 3 | | | (14,704,023 | ) |
| Change in fair value | | | 11,690,720 | |
| Fair value as of December 31, 2020 | | $ | 9,186,354 | |
There were transfers out of Level 3 to other levels in the fair value hierarchy totaling $14,704,023 for the period from August 20, 2020 (inception) until December 31, 2020.
NOTE 12. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statement was issued. Based upon this review, other than described in Note 2, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
F-21
