References to the "Company," "AMCI Acquisition Corp. II," "AMCI," "our," "us" or
"we" refer to AMCI Acquisition Corp. II. The following discussion and analysis
of the Company's financial condition and results of operations should be read in
conjunction with the unaudited interim condensed financial statements and the
notes thereto contained elsewhere in this report. Certain information contained
in the discussion and analysis set forth below includes forward-looking
statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
Some of the statements contained in this Quarterly Report on Form 10-Q may
constitute "forward-looking statements" for purposes of the federal securities
laws. Our forward-looking statements include, but are not limited to, statements
regarding our or our management team's expectations, hopes, beliefs, intentions
or strategies regarding the future. In addition, any statements that refer to
projections, forecasts or other characterizations of future events or
circumstances, including any underlying assumptions, are forward-looking
statements. The words "anticipate," "believe," "continue," "could," "estimate,"
"expect," "intend," "may," "might," "plan," "possible," "potential," "predict,"
"project," "should," "would" and similar expressions may identify
forward-looking statements, but the absence of these words does not mean that a
statement is not forward-looking.
The forward-looking statements contained in this Quarterly Report on Form 10-Q
are based on our current expectations and beliefs concerning future developments
and their potential effects on us. There can be no assurance that future
developments affecting us will be those that we have anticipated. These
forward-looking statements involve a number of risks, uncertainties (some of
which are beyond our control) or other assumptions that may cause actual results
or performance to be materially different from those expressed or implied by
these forward-looking statements. These risks and uncertainties include, but are
not limited to, the following risks, uncertainties (some of which are beyond our
control) or other factors:
? we have no operating history and no revenues, and you have no basis on which to
evaluate our ability to achieve our business objective;
? our ability to select an appropriate target business or businesses;
our ability to complete a merger, share exchange, asset acquisition, share
? purchase, reorganization or similar business combination with one or more
businesses (the "business combination");
? our expectations around the performance of a prospective target business or
businesses;
? our success in retaining or recruiting, or changes required in, our officers,
key employees or directors following our initial business combination;
our officers and directors allocating their time to other businesses and
? potentially having conflicts of interest with our business or in approving our
initial business combination;
? our potential ability to obtain additional financing to complete our initial
business combination;
? our pool of prospective target businesses;
? our ability to consummate an initial business combination due to the
uncertainty resulting from the recent COVID-19 pandemic;
? the ability of our officers and directors to generate a number of potential
business combination opportunities;
? our public securities' potential liquidity and trading;
the use of proceeds not held in a U.S.-based trust account maintained by
? Continental Stock Transfer & Trust Company, acting as trustee (the "trust
account"), or available to us from interest income on the trust account
balance;
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? the trust account not being subject to claims of third parties;
? our financial performance following our initial public offering (the "initial
public offering"); and
the other risks and uncertainties discussed herein, in our filings with the SEC
? and in our final prospectus relating to our initial public offering, filed with
the U.S. Securities and Exchange Commission (the "SEC") on August 4, 2021.
Should one or more of these risks or uncertainties materialize, or should any of
our assumptions prove incorrect, actual results may vary in material respects
from those projected in these forward-looking statements. We undertake no
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as may be required
under applicable securities laws.
Overview
We are a blank check company incorporated as a Delaware corporation on January
28, 2021. We were 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").
Our sponsor is AMCI Sponsor II LLC, a Delaware limited liability company (the
"Sponsor").
The registration statement for our initial public offering was declared
effective on August 3, 2021 (the "effective date"). On August 6, 2021, we
consummated our initial public offering (the "initial public offering") of
15,000,000 units (the "units"). Each unit consists of one Class A common stock,
par value $0.0001 per share (the "Class A common stock"), and one-half of one
redeemable warrant (the "warrant"), each whole warrant entitling the holder
thereof to purchase one Class A common stock for $11.50 per share. The units
were sold at a price of $10.00 per unit, generating gross proceeds for us of
$150,000,000.
The underwriters had a 45-day option from the date of the underwriting agreement
(August 3, 2021) to purchase up to an additional 2,250,000 units to cover
over-allotments, if any. On September 17, 2021, the over-allotment option
expired unexercised, resulting in the forfeiture of 562,500 shares of Class B
common stock.
Simultaneously with the closing of the initial public offering, we completed the
private sale of an aggregate of 3,500,000 warrants (the "private placement
warrants") to the Sponsor at a purchase price of $1.00 per private placement
warrant, generating gross proceeds for us of $3,500,000. The private placement
warrants are identical to the warrants sold in the initial public offering,
except that the private placement warrants, so long as they are held by the
Sponsor or its permitted transferees, (i) are not redeemable by us, (ii) may not
(including the Class A common stock issuable upon exercise of such private
placement warrants), subject to certain limited exceptions, be transferred,
assigned or sold by such holders until 30 days after the completion of our
initial business combination, (iii) may be exercised by the holders on a
cashless basis and (iv) will be entitled to registration rights. No underwriting
discounts or commissions were paid with respect to such sales.
Proposed Business Combination
On March 8, 2022, we entered into an agreement and plan of merger (the "Merger
Agreement") with AMCI Merger Sub, Inc., a Delaware corporation and our wholly
owned subsidiary ("Merger Sub"), and LanzaTech NZ, Inc., a Delaware corporation
("LanzaTech"). The transactions contemplated by the Merger Agreement are
referred to herein as the "Proposed Business Combination." The time of the
closing of the Proposed Business Combination is referred to herein as the
"Closing."
If the Proposed Business Combination is approved by our stockholders and
LanzaTech's stockholders, and the closing conditions in the Merger Agreement are
satisfied or waived, then, among other things, upon the terms and subject to the
conditions of the Merger Agreement and in accordance with Delaware General
Corporation Law, Merger Sub will merge with and into LanzaTech, with LanzaTech
surviving the Merger as our wholly owned subsidiary (the "Merger"). In
connection with the consummation of the Merger, we will be renamed "LanzaTech
Global, Inc." and is referred to herein as "New LanzaTech" as of the time
following such change of name.
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Under the Merger Agreement, we have agreed to acquire all of the outstanding
equity interests of LanzaTech for consideration consisting of equity interests
of New LanzaTech valued at $1,817,000,000 in the aggregate. The consideration to
be paid to holders of shares of LanzaTech capital stock will be shares of common
stock of New LanzaTech ("New LanzaTech Common Stock"), valued at $10.00 per
share, to be paid at the closing of the Merger. The number of shares of New
LanzaTech Common Stock payable in the Merger in respect of each share of
LanzaTech capital stock (each, a "LanzaTech Share") will be determined based on
the exchange ratio (the "Exchange Ratio"), and certain corresponding
adjustments, in each case as set forth in the Merger Agreement.
Pursuant to the Merger Agreement, at Closing: (i) each warrant to purchase
LanzaTech Shares (each, a "LanzaTech Warrant") that is outstanding and
unexercised immediately prior to Closing and would automatically be exercised or
exchanged in full in accordance with its terms by virtue of the occurrence of
the Merger, will be so automatically exercised or exchanged in full for the
applicable LanzaTech Shares, and each such LanzaTech Share will be treated as
being issued and outstanding immediately prior to Closing and will be canceled
and converted into the right to receive the applicable shares of New LanzaTech
Common Stock; and (ii) each LanzaTech Warrant that is outstanding and
unexercised immediately prior to the Closing and is not automatically exercised
in full as described in clause (i) will be converted into a warrant to purchase
shares of New LanzaTech Common Stock, in which case (a) the number of shares
underlying such New LanzaTech warrant (each, a "New LanzaTech Warrant") will be
determined by multiplying the number of LanzaTech Shares subject to such warrant
immediately prior to Closing, by the Exchange Ratio and (b) the per share
exercise price of such New LanzaTech Warrant will be determined by dividing the
per share exercise price of such LanzaTech Warrant immediately prior to the
Effective Time by the Exchange Ratio, except that in the case of certain
warrants specified in the Merger Agreement, such exercise price will be $10.00.
Pursuant to the Merger Agreement, at Closing, each option to purchase LanzaTech
Shares (each, a "LanzaTech Option") will be converted into an option to purchase
a number of shares of New LanzaTech Common Stock (rounded down to the nearest
whole share) equal to the product of (i) the number of LanzaTech Shares subject
to such LanzaTech Option multiplied by (ii) the Exchange Ratio. The exercise
price of such New LanzaTech option will be equal to the quotient of (a) the
exercise price per share of such LanzaTech Option in effect immediately prior to
the Effective Time divided by (b) the Exchange Ratio (and as so determined, this
exercise price will be rounded up to the nearest full cent).
Pursuant to the Merger Agreement, at Closing, each award of restricted shares of
LanzaTech common stock (each, a "LanzaTech RSA") that is outstanding immediately
prior to the Effective Time will be converted into an award of restricted shares
of New LanzaTech Common Stock (each, a "New LanzaTech RSA") on the same terms
and conditions as were applicable to such LanzaTech RSA immediately prior to the
Effective Time, except that such New LanzaTech RSA will relate to a number of
shares of New LanzaTech Common Stock equal to the number of LanzaTech Shares
subject to such LanzaTech RSA, multiplied by the Exchange Ratio.
The closing of the Merger is subject to certain customary conditions, including,
among others, (i) adoption by AMCI's stockholders and LanzaTech's stockholders
of the Merger Agreement and their approval of certain other actions related to
the Proposed Business Combination, (ii) the expiration or termination of the
waiting period (or any extension thereof) applicable to the transactions
contemplated by the Merger Agreement and any ancillary agreements, in each case
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, (iii) the
effectiveness of a registration statement on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended, with respect to the
shares of New LanzaTech Common Stock to be paid as consideration in the Merger,
(iv) there being no government order or law enjoining, prohibiting or making
illegal the consummation of the Merger or the transactions contemplated by the
Merger Agreement, (v) AMCI having at least $5,000,001 of net tangible assets (as
determined in accordance with Rule 3a51-1(g)(1) under the Securities and
Exchange Act of 1934, as amended (the "Exchange Act")) after giving effect to
any payments required to be made in connection with the redemption of AMCI's
public shares and the proceeds from the Subscription Agreements described below,
(vi) AMCI having at least $250,000,000 of cash at the closing of the Merger,
consisting of cash held in AMCI's trust account after taking into account any
redemption of AMCI's public shares, and the proceeds from the Subscription
Agreements described below, net of transaction expenses of AMCI and LanzaTech,
and (vii) the listing on Nasdaq of the shares of New LanzaTech Common Stock
issued in connection with the Proposed Business Combination.
For additional information regarding the Merger Agreement, see the Company's
Amendment No. 1 to its Registration Statement on Form S-4 filed with the SEC on
October 12, 2022.
This Form 10-Q does not assume the closing of the Proposed Business Combination.
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Subscription Agreements
In connection with the execution of the Merger Agreement, we entered into
subscription agreements (the "Subscription Agreements") with certain accredited
and institutional buyers (the "PIPE Investors"), including certain current
stockholders and partners of LanzaTech and an affiliate of our Sponsor pursuant
to which, among other things, we agreed to issue and sell, in a private
placement to close immediately prior to the closing of the Merger, an aggregate
of 12,500,000 shares of Class A common stock at a purchase price of $10.00 per
share (the "PIPE Investment"). The PIPE Investment includes 3,000,000 shares of
Class A common stock to be issued to a certain PIPE Investor that has a SAFE
Note with LanzaTech, pursuant to a subscription agreement to be entered into
prior to Closing.
On October 18, 2022, we entered into two additional Subscription Agreements with
certain accredited investors, pursuant to which, among other things, we agreed
to issue and sell, in a private placement to close immediately prior to the
closing of the Merger, an aggregate of 5,500,000 shares of Class A common stock
at a purchase price of $10.00 per share (the "Additional PIPE Investment") to
the PIPE Investors.
The Additional PIPE Investment represents the parties' efforts to raise
additional capital in order to satisfy the Minimum Closing Cash Condition (as
defined in the Merger Agreement). The Additional PIPE Investment is in addition
to the 12,500,000 shares of Class A common stock that we agreed to sell, in a
private placement to close immediately prior to the closing of the Proposed
Business Combination, to certain other accredited investors and qualified
institutional buyers. To date, investors have agreed to purchase shares of Class
A common stock for an aggregate purchase price of $180,000,000 in the PIPE
Investment.
LanzaTech Support Agreement
In connection with the execution of the Merger Agreement, we entered into a
support agreement with certain LanzaTech stockholders (the "LanzaTech Support
Agreement"), pursuant to which each such LanzaTech stockholder irrevocably and
unconditionally agreed, among other things, to (i) validly execute and deliver
to LanzaTech, in respect of all such stockholders' LanzaTech Shares, written
consents to the adoption of the Merger Agreement and approval of other matters
required to obtain the requisite stockholder approval for the Merger and other
related matters from the LanzaTech stockholders (the "LanzaTech Requisite
Approval"), in each case, within 10 business days after the Registration
Statement has been declared effective by the SEC; (ii) vote (whether pursuant to
a meeting of LanzaTech's stockholders or by written consent) in favor of the
adoption of the Merger Agreement and approval of other matters required to
obtain the LanzaTech Requisite Approval; and (iii) vote (whether pursuant to a
meeting of LanzaTech's stockholders or by written consent) against (a) any
competing proposal for the acquisition of LanzaTech and (b) any other action
that would reasonably be expected to (x) materially impede, interfere with,
delay, postpone or adversely affect the Merger or any of the other transactions
contemplated by the Merger Agreement, (y) to the knowledge of such LanzaTech
stockholder, result in a material breach of any covenant, representation or
warranty or other obligation or agreement of LanzaTech under the Merger
Agreement or (z) result in a material breach of any covenant, representation or
warranty or other obligation or agreement of the relevant stockholder contained
in the LanzaTech Support Agreement.
The LanzaTech stockholders that entered into the LanzaTech Support Agreement
include those stockholders who (i) are directors or officers of LanzaTech and
currently hold LanzaTech Shares or (ii) hold 5% or more of the LanzaTech Shares.
The LanzaTech Shares that are owned by the stockholders party to the LanzaTech
Support Agreement represent approximately 69.56% of the outstanding voting
LanzaTech Shares.
Sponsor Support Agreement
In connection with the execution of the Merger Agreement, the Sponsor and the
holders of all of the Founder Shares, including all of our directors and
officers (all of the foregoing, the "AMCI Insiders"), entered into a support
agreement (the "Sponsor Support Agreement") with the Company and LanzaTech
pursuant to which each AMCI Insider agreed, among other things, to: (i) vote all
the shares of capital stock held by such AMCI Insider (a) in favor of each of
the proposals to be submitted to the special meeting of our stockholders in
connection with the Merger and (b) against a business combination not relating
to the Merger and any other action that would reasonably be expected to (x)
materially impede, interfere with, delay, postpone or adversely affect the
Merger or any of the other transactions contemplated by the Merger Agreement,
(y) to the knowledge of such AMCI Insider, result in a material breach of any
covenant, representation or warranty or other obligation or agreement of AMCI
under the Merger Agreement or (z) result in a material breach of any covenant,
representation or warranty or other obligation or agreement contained in the
Sponsor Support Agreement; (ii)
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irrevocably waive any anti-dilution right or other protection with respect to
the shares of Founder Shares that would result in the Founder Shares converting
into Class A common stock at a ratio greater than one-for-one; and (iii) not to
elect to redeem their respective shares of our common stock in connection with
the Merger.
In addition, under the Sponsor Support Agreement, the AMCI Insiders agreed to
forfeit, on a pro rata basis, a number of shares of Founder Shares equal to
1,250,000 shares of Founder Shares (which is one-third of the total number of
shares of founder Shares outstanding) multiplied by a percentage equal to the
percentage by which the level of redemptions of holders of Class A common stock,
if any, exceeds 50% of the total issued and outstanding shares Class A common
stock multiplied by two.
The foregoing description of the Proposed Business Combination, the Subscription
and Agreements, the LanzaTech Support Agreement and the Sponsor Support
Agreement does not purport to be complete. For further information on the
Subscription Agreements, the LanzaTech Support Agreement and the Sponsor Support
Agreement refer to the full agreements filed with the SEC on May 10, 2022 on a
Registration Statement on Form S-4 on May 10, 2022.
Results of Operations
Our entire activity since inception up to September 30, 2022 was in preparation
for our formation and the initial public offering and since the IPO, the search
for a business combination target. We will not be generating any operating
revenues until the closing and completion of our initial business combination.
For the three months ended September 30, 2022, we had a net income of
approximately $1.2 million, which consisted of approximately a $1.4 million gain
from changes in fair value of derivative warrant liabilities, approximately a
$172,000 gain from extinguishment of deferred underwriting commissions on public
warrants and approximately $733,000 of income from investments held in the trust
account, partially offset by approximately $876,000 in general and
administrative expenses, $30,000 in general and administrative expenses -
related party, approximately $76,000 in capital based tax expenses,
approximately $50,000 in franchise tax expenses, and approximately $54,000 in
income tax expenses.
For the three months ended September 30, 2021, we had net income of
approximately $469,000, which consisted of approximately a $1.4 million gain
from changes in fair value of derivative warrant liabilities and approximately
$2,000 of income from investments held in the trust account, offset by
approximately $305,000 in general and administrative expenses, approximately
$135,000 in franchise tax expenses, and approximately $476,000 in offering costs
allocated to derivative warrant liabilities.
For the nine months ended September 30, 2022, we had a net income of
approximately $1.1 million, which consisted of approximately a $4.1 million gain
from changes in fair value of derivative warrant liabilities, approximately
$172,000 gain from extinguishment of deferred underwriting commissions on public
warrants and approximately $972,000 of income from investments held in the trust
account, partially offset by approximately $3.7 million in general and
administrative expenses, $90,000 in general and administrative expenses -
related party, approximately $184,000 in capital based tax expenses,
approximately $150,000 in franchise tax expenses, and approximately $54,000 in
income tax expenses.
For the period from January 28, 2021 (inception) through September 30, 2021, we
had net income of approximately $468,000, which consisted of approximately a
$1.4 million gain from changes in fair value of derivative warrant liabilities
and an approximately $2,000 of income from investments held in the trust
account, offset by approximately $306,000 in general and administrative
expenses, approximately $135,000 in franchise tax expenses, and approximately
$476,000 in offering costs allocated to derivative warrant liabilities.
Liquidity and Going Concern
As of September 30, 2022, the Company had approximately $7,000 in operating cash
and a working capital deficit of approximately $3.5 million, not taking into
account tax obligations of approximately $536,000 that may be paid from income
from investments held in the trust account.
Our liquidity needs up to September 30, 2022 have been satisfied through a
contribution of $25,000 from the Sponsor to cover certain offering costs in
exchange for the issuance of founder shares, and a loan and advances from the
Sponsor pursuant to the Note. Subsequent
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to the initial public offering, net proceeds from the private placement of $0.9
million were placed in the operating account for working capital purposes. In
addition, in order to finance transaction costs in connection with a business
combination, the Sponsor or an affiliate of the Sponsor, or certain of our
officers and directors may, but are not obligated to, provide us with Working
Capital Loans. On March 28, 2022, the Company entered into a noninterest-bearing
Working Capital Loan with its Sponsor for the principal amount of up to $1.5
million. As of September 30, 2022 and December 31, 2021, there were no amounts
outstanding under any Working Capital Loan.
In connection with the Company's assessment of going concern considerations in
accordance with Financial Accounting Standards Board's ("FASB") Accounting
Standards Update ("ASU") 2014-15, "Disclosures of Uncertainties about an
Entity's Ability to Continue as a Going Concern," management has determined that
the liquidity condition, and the mandatory liquidation and subsequent
dissolution that will be required if the Company does not complete a business
combination before August 6, 2023 raises substantial doubt about the Company's
ability to continue as a going concern. Although Management expects that it will
be able to raise additional capital to support its planned activities and
complete a business combination on or prior to August 6, 2023, it is uncertain
whether it will be able to do so. No adjustments have been made to the carrying
amounts of assets or liabilities should we be required to liquidate after August
6, 2023. The condensed financial statements do not include any adjustment that
might be necessary if the Company is unable to continue as a going concern. The
Company intends to complete a business combination before the mandatory
liquidation date. Over this time period, the Company will be using the funds
outside of the trust account 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.
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 our financial position, results of our
operations and/or search for a target company, the specific impact is not
readily determinable as of the date of the unaudited condensed financial
statements. The unaudited condensed financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Contractual Obligations
Registration Rights
The holders of the (i) founder shares, which were issued in a private placement
prior to the closing of the initial public offering, (ii) private placement
warrants, which were issued in a private placement simultaneously with the
closing of the initial public offering and the shares of Class A common stock
underlying such private placement warrants and (iii) private placement warrants
that may be issued upon conversion of Working Capital Loans, will have
registration rights to require us to register a sale of any of its securities
held by them prior to the consummation of the initial business combination
pursuant to a registration rights agreement which was signed on the effective
date of the initial public offering. The holders of these securities are
entitled to make up to three demands, excluding short form demands, that we
register such securities. In addition, the holders have certain "piggy-back"
registration rights with respect to registration statements filed subsequent to
our completion of our initial business combination. We will bear the expenses
incurred in connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriters a 45-day option from the date of the underwriting
agreement to purchase up to an additional 2,250,000 units to cover
over-allotments, if any. On September 17, 2021, the over-allotment option
expired unexercised, resulting in the forfeiture of 562,500 shares of Class B
common stock.
The underwriters were paid an underwriting discount of one percent (1%) of the
gross proceeds of the initial public offering, or $1,500,000. Additionally in
connection with the initial public offering, the Company agreed to pay the
underwriters a deferred underwriting discount of 3.5% of the gross proceeds, or
$5,250,000, of the initial public offering upon the completion of our initial
business combination. On September 29, 2022, Evercore Group L.L.C. ("Evercore"),
the representative of the underwriters of our initial public offering, waived
their deferred underwriting fee that accrued from its participation in our
initial public offering. The Company recognized approximately $4.9 million of
the commissions waiver as a reduction to additional paid-in capital in the
condensed statements of changes in stockholders' deficit for the three and nine
months ended September 30, 2022, as this portion represents an extinguishment of
deferred underwriting commissions on public shares which was originally
recognized in accumulated deficit. The remaining balance
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of approximately $172,000 is recognized as a gain from extinguishment of
deferred underwriting commissions on public warrants in the condensed statements
of operations, which represents the original amount expensed in the Company's
initial public offering.
On September 27, 2022 and September 29, 2022, the Company received notice and a
formal letter, respectively, from Evercore, advising, among other things, that
it had, among other things, (i) resigned from and ceased or refused to act in,
its roles as co-placement agent, co-capital markets advisor and exclusive
financial advisor to the Company in connection with the Merger and as
underwriter in the Company's initial public offering and (ii) waived its right
to receive an aggregate of $13,050,000 in fees, all of which were contingent
upon and payable upon the closing of the Merger, consisting of $500,000 for its
role as co-placement agent, $7,500,000 for its role as exclusive financial
advisor and $5,050,000 of deferred underwriting fees accrued from its
participation in the Company's initial public offering, as well as any expense
reimbursements owed to it under those arrangements.
Administrative Service Fee
Subsequent to the closing of the initial public offering, we have agreed to pay
our Sponsor $10,000 per month for office space and secretarial and
administrative services provided to members of the management team. Upon
completion of the initial business combination or our liquidation, we will cease
paying these monthly fees. For the three months ended September 30, 2022 and
2021, we incurred $30,000 and $20,000 of such fees, respectively, which are
included as general and administrative fees - related party on the accompanying
unaudited condensed statements of operations. For the nine months ended
September 30, 2022 and for the period from January 28 (inception) through
September 30, 2021, we incurred $90,000 and $20,000 of such fees, respectively,
which are included as general and administrative fees - related party on the
accompanying unaudited condensed statements of operations.
Critical Accounting Policies
This management's discussion and analysis of our financial condition and results
of operations is based on our unaudited condensed financial statements, which
have been prepared in accordance with U.S. GAAP. The preparation of these
unaudited condensed financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses and the disclosure of contingent assets and liabilities in our
unaudited condensed financial statements. On an ongoing basis, we evaluate our
estimates and judgments, including those related to fair value of financial
instruments and accrued expenses. We base our estimates on historical
experience, known trends and events and various other factors that we believe to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. We have identified the
following as our critical accounting policies:
Class A Common Stock Shares Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in ASC Topic 480, "Distinguishing Liabilities from
Equity." Class A common stock subject to mandatory redemption (if any) are
classified as liability instruments and is measured at fair value. Conditionally
redeemable Class A common stock (including Class A common stock that features
redemption rights that are either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within our
control) are classified as temporary equity. At all other times, Class A common
stock are classified as stockholders' equity. Our Class A common stock feature
certain redemption rights that are considered to be outside of our control and
subject to the occurrence of uncertain future events. Accordingly, as of the
initial public offering, 15,000,000 shares of Class A common stock subject to
possible redemption are presented at redemption value as temporary equity,
outside of the stockholders' equity section of our condensed balance sheets.
Under ASC 480-10-S99, we have elected to recognize changes in the redemption
value immediately as they occur and adjust the carrying value of the security to
equal the redemption value at the end of the reporting period. This method would
view the end of the reporting period as if it were also the redemption date of
the security. Effective with the closing of the initial public offering, we
recognized the accretion from initial book value to redemption amount, which
resulted in charges against additional paid-in capital (to the extent available)
and accumulated deficit.
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Derivative Financial Instruments
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of its financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and FASB ASC Topic 815, "Derivatives and Hedging" ("ASC 815"). The
classification of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is re-assessed at the end of
each reporting period.
The public warrants and the private placement warrants are recognized as
derivative liabilities in accordance with ASC 815. Accordingly, we recognize the
warrant instruments as liabilities at fair value and adjusts the carrying value
of the instruments to fair value at each reporting period until they are
exercised. The initial fair value of the public warrants issued in connection
with the initial public offering was estimated using a Monte-Carlo simulation
model. The fair value of the public warrants as of September 30, 2022 and
December 31, 2021 is based on observable listed prices for such warrants. The
fair value of the private placement warrants as of September 30, 2022 and
December 31, 2021 is determined using a Black-Scholes option pricing model. The
determination of the fair value of the warrant liability may be subject to
change as more current information becomes available and, accordingly, the
actual results could differ significantly. Derivative warrant liabilities are
classified as non-current liabilities as their liquidation is not reasonably
expected to require the use of current assets or require the creation of current
liabilities.
Net Income (Loss) Per Share Of Common Stock
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." We have two classes of shares, which are referred to as
Class A common stock and Class B common stock. Income and losses are shared pro
rata between the two classes of shares. Net income (loss) per common share is
calculated by dividing the net income (loss) by the weighted average shares of
common stock outstanding for the respective period.
The calculation of diluted net income (loss) does not consider the effect of the
warrants underlying the units sold in the initial public offering and the
private placement warrants to purchase an aggregate of 11,000,000 warrants in
the calculation of diluted income (loss) per share, because their exercise is
contingent upon future events and their inclusion would be anti-dilutive under
the treasury stock method. As a result, diluted net income (loss) per share are
the same as basic net income (loss) per share for the three and nine months
ended September 30, 2022 and for the three months ended September 30, 2021 and
for the period from January 28, 2021 (inception) through September 30, 2021.
Accretion associated with the redeemable Class A common stock is excluded from
earnings per share as the redemption value approximates fair value.
Recent Accounting Pronouncements
In June 2022, the FASB issued ASU 2022-03, ASC Subtopic 820 "Fair Value
Measurement of Equity Securities Subject to Contractual Sale Restrictions". The
ASU amends ASC 820 to clarify that a contractual sales restriction is not
considered in measuring an equity security at fair value and to introduce new
disclosure requirements for equity securities subject to contractual sale
restrictions that are measured at fair value. The ASU applies to both holders
and issuers of equity and equity-linked securities measured at fair value. The
amendments in this ASU are effective for the Company in fiscal years beginning
after December 15, 2023, and interim periods within those fiscal years. Early
adoption is permitted for both interim and annual financial statements that have
not yet been issued or made available for issuance. The Company is still
evaluating the impact of this pronouncement on the condensed financial
statements.
Management does not believe that any other recently issued, but not yet
effective, accounting standards updates, if currently adopted, would have a
material effect on our unaudited condensed financial statements.
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Off-Balance Sheet Arrangements
As of September 30, 2022, we did not have any off-balance sheet arrangements as
defined in Item 303(b)(1)(ii)(B) of Regulation S-K.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, the unaudited condensed
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal control over financial reporting pursuant to Section 404 of the
Sarbanes-Oxley Act of 2002, (ii) provide all of the compensation disclosure that
may be required of non-emerging growth public companies under the Dodd-Frank
Wall Street Reform and Consumer Protection Act, (iii) comply with any
requirement that may be adopted by the PCAOB regarding mandatory audit firm
rotation or a supplement to the auditor's report providing additional
information about the audit and the unaudited condensed financial statements
(auditor discussion and analysis) and (iv) disclose certain executive
compensation related items such as the correlation between executive
compensation and performance and comparisons of the executive compensation to
median employee compensation. These exemptions will apply for a period of five
years following the completion of our initial public offering or until we are no
longer an "emerging growth company," whichever is earlier.
Recent Developments
Waiver of Deferred Commission
On September 27, 2022 and September 29, 2022, we received notice and a formal
letter, respectively, from Evercore Group L.L.C. ("Evercore"), the
representative of the underwriters of our initial public offering and
co-placement agent in the private placement (as defined in the Registration
Statement on Form S-4 filed with the SEC on October 12, 2022), advising, among
other things, that it has resigned from and has ceased or refused to act in, its
roles as co-placement agent in the private placement, co-capital markets advisor
and exclusive financial advisor to us and as underwriter in our initial public
offering and every capacity and relationship described in the Registration
Statement on Form S-4 filed with the SEC on October 12, 2022, and waiving any
entitlement to its portion of the deferred underwriting fee that accrued from
Evercore's participation in the initial public offering in the amount of
approximately $5.1 million. This fee was agreed between the Company and Evercore
in the initial public offering underwriting agreement signed by the parties on
August 3, 2021, and was earned in full upon completion of the initial public
offering, but payment was conditioned upon closing of our initial business
combination such that the waiver was given by Evercore on a gratuitous basis
without any consideration to Evercore from the Company.
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