UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For
the quarter ended
For the transition period from to
Commission
file number:
(Exact Name of Registrant as Specified in Its Charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
share | The | |||
| Redeemable Warrants, each whole warrant exercisable for one share of Common Stock for $11.50 per share | BWACW | The Nasdaq Stock Market LLC | ||
| Units, each consisting of one share of Common Stock and one Redeemable Warrant | BWACU | The Nasdaq Stock Market LLC |
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large, accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large, accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company | ||||
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As
of November 22, 2021,
BETTER WORLD ACQUISITION CORP.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2021
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
BETTER WORLD ACQUISITION CORP.
CONDENSED BALANCE SHEETS
| September 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | Restated | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Due from Sponsor | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| Cash and marketable securities held in Trust Account | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities - Accounts payable and accrued expenses | $ | $ | ||||||
| Warrant Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments | ||||||||
| Common stock subject to possible redemption | ||||||||
| Stockholders’ Deficit | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
1
BETTER WORLD ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended September 30, 2021 | Nine Months Ended September 30, 2021 | For the Period from August 5, (Inception) Through September 30, 2020 | ||||||||||
| Formation and operational costs | $ | $ | $ | |||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||
| Other income (expenses): | ||||||||||||
| Interest earned on marketable securities held in Trust Account | ||||||||||||
| Unrealized loss on marketable securities held in Trust Account | ( | ) | ( | ) | ||||||||
| Change in fair value of private warrants liabilities | ||||||||||||
| Total other income, net | $ | $ | $ | |||||||||
| Net income (loss) | $ | $ | $ | ( | ) | |||||||
| Basic and diluted weighted average shares outstanding, redeemable common stock | — | |||||||||||
| Basic and diluted net income (loss) per share, redeemable common stock | $ | $ | $ | — | ||||||||
| Basic and diluted weighted average shares outstanding, non-redeemable common stock | ||||||||||||
| Basic and diluted net income (loss) per share, non-redeemable common stock | $ | $ | ( | ) | ||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
2
BETTER WORLD ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY
(UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
RESTATED
| Common Stock | Additional Paid | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | in Capital | Deficit | Deficit | ||||||||||||||||
| Balance – January 1, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Net income | — | |||||||||||||||||||
| Balance – March 31, 2021 (unaudited) | ( | ) | ( | ) | ||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance – June 30, 2021 (unaudited) | ( | ) | ( | ) | ||||||||||||||||
| Net income | — | |||||||||||||||||||
| Balance – September 30, 2021 (unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
FOR THE PERIOD FROM AUGUST 5, 2020 (INCEPTION) THROUGH SEPTEMBER 30, 2020
| Common Stock | Additional Paid | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | in Capital | Deficit | Equity | ||||||||||||||||
| Balance – August 5, 2020 (inception) | $ | $ | $ | $ | ||||||||||||||||
| Issuance of common stock to Sponsor | ||||||||||||||||||||
| Issuance of Representative Shares | ||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance – September 30, 2020 (unaudited) | $ | $ | $ | ( | ) | $ | ||||||||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
3
BETTER WORLD ACQUISITION CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine
months | For the Period from August 5, 2020 (inception) through September 30, | |||||||
| 2021 | 2020 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Interest earned on marketable securities held in Trust Account | ( | ) | ||||||
| Unrealized loss on marketable securities held in Trust Account | ||||||||
| Change in fair value of private warrants liability | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from promissory note – related party | ||||||||
| Repayment of promissory note – related party | ( | ) | ||||||
| Payment of offering costs | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net Change in Cash | ( | ) | ||||||
| Cash – Beginning of period | ||||||||
| Cash – End of period | $ | $ | ||||||
| Non-Cash investing and financing activities: | ||||||||
| Offering costs paid by Sponsor in exchange for issuance of founder shares | $ | $ | ||||||
| Issuance of Representative Shares | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
4
BETTER WORLD ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS, LIQUIDITY AND GOING CONCERN
Better World Acquisition Corp. (the “Company”) was incorporated in Delaware on August 5, 2020. The Company is a blank check company formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities (the “Business Combination”).
Although the Company is not limited to a particular industry or sector for purposes of consummating a Business Combination, the Company is focused on target businesses in the healthy living industries that benefit from strong Environmental, Social and Governance (“ESG”) profiles. The Company is an early stage and emerging growth company and, as such, the Company is subject to all the risks associated with early stage and emerging growth companies.
As of September 30, 2021, the Company had not commenced any operations. All activity for the period from August 5, 2020 (inception) through September 30, 2021 relates to the Company’s formation, the initial public offering (“Initial Public Offering”), which is described below, and identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The
registration statement for the Company’s Initial Public Offering was declared effective on November 12, 2020. On November 17, 2020,
the Company consummated the Initial Public Offering of
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of
Following
the closing of the Initial Public Offering on November 17, 2020, an amount of $
On
November 17, 2020, the underwriters notified the Company of their intention to partially exercise their over-allotment option on November
19, 2020. As such, on November 19, 2020, the Company consummated the sale of an additional
Transaction
costs amounted to $
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 the Private Warrants, although substantially all of the net proceeds are intended to be applied generally toward completing
a Business Combination. The Company must complete a Business Combination having an aggregate fair market value of at least
The
Company will provide its holders of the outstanding Public Shares (“the public stockholders”) with the opportunity to redeem
all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting
called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder
approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. 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 $
5
BETTER WORLD ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The
Company will proceed with a Business Combination if the Company has net tangible assets of at least $
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 Amended and Restated Certificate of Incorporation
that would affect a public stockholders’ ability to convert or sell their shares to the Company in connection with a Business Combination
or affect the substance or timing of the Company’s obligation to redeem
On November 9, 2021, the Company’s board of
directors approved the extension of the date by which the Company has to consummate a Business Combination from November 17, 2021 to February
17, 2022. In connection with the extension, the Sponsor deposited into the Trust Account $
If the Company is unable to complete 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 the Company to pay taxes, divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the 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.
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. 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 amount of funds deposited into the Trust Account ($10.10).
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 vendor 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 $
6
BETTER WORLD ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Liquidity and Going Concern
As
of September 30, 2021, the Company had $
Until the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination.
The Company expects it will need to raise additional capital through loans or additional investments from its Sponsor, stockholders, officers, directors, or third parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements.
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the mandatory liquidation and subsequent dissolution, should the Company be unable to complete a business combination, raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after February 17, 2022.
NOTE 2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
In connection with the preparation of the Company’s financial
statements as of September 30, 2021, management determined it should restate its previously reported financial statements. The Company
determined that at the closing of the Initial Public Offering, it improperly valued its common stock subject to possible redemption. The
Company previously determined the common stock subject to possible redemption to be equal to the redemption value, while also taking into
consideration that a redemption cannot result in net tangible assets being less than $
In connection with the change in presentation for the common stock subject to redemption, the Company also revised its income (loss) per common share calculation to allocate net income (loss) evenly to all common shares. This presentation contemplates a Business Combination as the most likely outcome, in which case, all common shares share pro rata in the income (loss) of the Company.
There has been no change in the Company’s total assets, liabilities or operating results.
7
The impact of the restatement on the Company’s financial statements is reflected in the following table.
| Balance Sheet as of November 17, 2020 | As Previously Reported |
Adjustment | As Restated | |||||||||
| Common stock subject to possible redemption | $ | $ | $ | |||||||||
| Common stock | $ | $ | ( |
) | $ | |||||||
| Additional paid-in capital | $ | $ | ( |
) | $ | |||||||
| Accumulated deficit | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| Total Stockholders’ Equity (Deficit) | $ | $ | ( |
) | $ | ( |
) | |||||
| Balance Sheet as of December 31, 2020 | ||||||||||||
| Common stock subject to possible redemption | $ | $ | $ | |||||||||
| Common stock | $ | $ | ( |
) | $ | |||||||
| Additional paid-in capital | $ | $ | ( |
) | $ | |||||||
| Accumulated deficit | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| Total Stockholders’ Equity (Deficit) | $ | $ | ( |
) | $ | ( |
) | |||||
| Balance Sheet as of March 31, 2021 | ||||||||||||
| Common stock subject to possible redemption | $ | $ | $ | |||||||||
| Common stock | $ | $ | ( |
) | $ | |||||||
| Additional paid-in capital | $ | $ | ( |
) | $ | |||||||
| Accumulated deficit | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| Total Stockholders’ Equity (Deficit) | $ | $ | ( |
) | $ | ( |
) | |||||
| Balance Sheet as of June 30, 2021 | ||||||||||||
| Common stock subject to possible redemption | $ | $ | $ | |||||||||
| Common stock | $ | $ | ( |
) | $ | |||||||
| Additional paid-in capital | $ | $ | ( |
) | $ | |||||||
| Accumulated deficit | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| Total Stockholders’ Equity (Deficit) | $ | $ | ( |
) | $ | ( |
) | |||||
| Statement of Operations for the Period Ended December 31, 2020 | ||||||||||||
| Basic and diluted weighted average shares outstanding, Common stock subject to possible redemption | ( |
) | ||||||||||
| Basic and diluted net loss per share, Common stock subject to possible redemption | $ | ( |
) | $ | ( |
) | ||||||
| Basic and diluted weighted average shares outstanding, Non-redeemable common stock | ( |
) | ||||||||||
| Basic and diluted net loss per share, Non-redeemable common stock | $ | ( |
) | $ | $ | ( |
) | |||||
| Statement of Operations for the Three Months Ended March 31, 2021 | ||||||||||||
| Basic and diluted weighted average shares outstanding, Common stock subject to possible redemption | ||||||||||||
| Basic and diluted net income per share, Common stock subject to possible redemption | $ | $ | ||||||||||
| Basic and diluted weighted average shares outstanding, Non-redeemable common stock | ( |
) | ||||||||||
| Basic and diluted net income per share, Non-redeemable common stock | $ | $ | ( |
) | $ | |||||||
| Statement of Operations for the Three Months Ended June 30, 2021 | ||||||||||||
| Basic and diluted weighted average shares outstanding, Common stock subject to possible redemption | ||||||||||||
| Basic and diluted net loss per share, Common stock subject to possible redemption | $ | $ | ( |
) | $ | ( |
) | |||||
| Basic and diluted weighted average shares outstanding, Non-redeemable common stock | ( |
) | ||||||||||
| Basic and diluted net loss per share, Non-redeemable common stock | $ | ( |
) | $ | $ | ( |
) | |||||
| Statement of Operations for the Six Months Ended June 30, 2021 | ||||||||||||
| Basic and diluted weighted average shares outstanding, Common stock subject to possible redemption | ||||||||||||
| Basic and diluted net income per share, Common stock subject to possible redemption | $ | $ | $ | |||||||||
| Basic and diluted weighted average shares outstanding, Non-redeemable common stock | ( |
) | ||||||||||
| Basic and diluted net income per share, Non-redeemable common stock | $ | $ | ( |
) | $ | |||||||
| Statement of Cash Flows for the Period Ended December 31, 2020 | ||||||||||||
| Initial classification of common stock subject to possible redemption | $ | $ | $ | |||||||||
| Change in value of common stock subject to possible redemption | $ | ( |
) | $ | $ | |||||||
| Statement of Cash Flows for the Three Months Ended March 31, 2021 | ||||||||||||
| Change in value of common stock subject to possible redemption | $ | $ | ( |
) | $ | |||||||
| Statement of Cash Flows for the Six Months Ended June 30, 2021 | ||||||||||||
| Change in value of common stock subject to possible redemption | $ | ( |
) | $ | $ | |||||||
| Statement of Changes in Stockholders’ (Deficit) Equity for the Period from August 5, 2020 (Inception) through December 31, 2020 | ||||||||||||
| Sale of |
$ | $ | ( |
) | $ | |||||||
| Common stock subject to redemption | $ | ( |
) | $ | $ | |||||||
| Accretion for common stock to redemption amount | $ | $ | ( |
) | $ | ( |
) | |||||
| Total shareholders’ (deficit) equity | $ | $ | ( |
) | $ | ( |
) | |||||
| Statement of Changes in Stockholders’ (Deficit) Equity for the Three Months ended March 31, 2021 | ||||||||||||
| Common stock subject to redemption | $ | ( |
) | $ | $ | |||||||
| Total shareholders’ (deficit) equity | $ | $ | ( |
) | $ | ( |
) | |||||
| Statement of Changes in Stockholders’ (Deficit) Equity for the Three Months ended June 30, 2021 | ||||||||||||
| Common stock subject to redemption | $ | $ | ( |
) | $ | |||||||
| Total shareholders’ (deficit) equity | $ | $ | ( |
) | $ | ( |
) | |||||
8
BETTER WORLD ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the period ended December 31, 2020, as filed with the SEC on June 11, 2021. The interim results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of the condensed financial statements in conformity with 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 statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these condensed financial statements is the determination of the fair value of the warrant liabilities. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2021 and December 31, 2020, respectively.
Cash and Marketable Securities Held in Trust Account
At September 30, 2021 and December 31, 2020, respectively, substantially all of the assets held in the Trust Account were held in U.S. Treasury securities. All of the Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in the Trust Account are included in interest earned on marketable securities held in the Trust Account in the accompanying condensed statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
9
BETTER WORLD ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s 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, as of September 30, 2021 and December 31, 2020, respectively, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated deficit.
At September 30, 2021 and December 31, 2020, the common stock reflected in the condensed balance sheets are reconciled in the following table:
| Gross proceeds | $ | |||
| Less: | ||||
| Common stock issuance costs | $ | ( | ) | |
| Amount placed in Trust Account in excess of IPO proceeds | ( | ) | ||
| Plus: | ||||
| Accretion of carrying value to redemption value | $ | |||
| Common stock subject to possible redemption | $ |
Warrant Liabilities
The Company accounts for the Private Warrants in accordance with the guidance contained in ASC 815-40-15-7D and 7F under which the Private Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Private Warrants as liabilities at their fair value and adjusts the Private 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 statements of operations. The Private Warrants for periods where no observable traded price was available are valued using a binomial lattice simulation model.
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.
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 September 30,
2021 and December 31, 2020, respectively. 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 effective tax rate differs from the statutory tax rate of
10
BETTER WORLD ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Net Income (Loss) Per Common Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. The Company applies the two-class method in calculating income (loss) per common share. Accretion associated with the redeemable common shares is excluded from income (loss) per common share as the redemption value approximates fair value.
The
calculation of diluted income (loss) per share does not consider the effect of the warrants issued in connection with the (i) Initial
Public Offering, and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events.
The warrants are exercisable to purchase
The following table reflects the calculation of basic and diluted net income (loss) per common share (in dollars, except per share amounts):
| For the Period from | ||||||||||||||||||||
| Three Months Ended | Nine Months Ended | August 5, 2020 (Inception) Through | ||||||||||||||||||
| September 30, 2021 | September 30, 2021 | September 30, 2020 | ||||||||||||||||||
| Redeemable | Non-redeemable | Redeemable | Non-redeemable | Non-redeemable | ||||||||||||||||
| common stock | common stock | common stock | common stock | common stock | ||||||||||||||||
| Basic and diluted net loss per common share | ||||||||||||||||||||
| Numerator: | ||||||||||||||||||||
| Allocation of net income (loss), as adjusted | $ | $ | $ | $ | $ | ( | ) | |||||||||||||
| Denominator: | ||||||||||||||||||||
| Basic and diluted weighted average shares outstanding | ||||||||||||||||||||
| Basic and diluted net income (loss) per common share | $ | $ | $ | $ | $ | ( | ) | |||||||||||||
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times may exceed the Federal Deposit Insurance Corporation maximum coverage of $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature, except for warrant liabilities (see Note 10).
11
BETTER WORLD ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
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.
Recent Accounting Standards
In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact, if any, that ASU2020-06 would have on its financial position, results of operations and cash flows.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed financial statements.
NOTE 4. PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold
NOTE 5. PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, the Sponsor and EarlyBirdCapital purchased an aggregate of
12
BETTER WORLD ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NOTE 6. RELATED PARTY TRANSACTIONS
Founder Shares
On
August 5, 2020, the Sponsor paid $
The Sponsor has agreed, subject to certain limited exceptions, not to transfer, assign or sell any of the Founder Shares until (1) with respect to 50% of the Founder Shares, the earlier of one year after the completion of a Business Combination and the date on which the closing price of the common stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing after a Business Combination and (2) with respect to the remaining 50% of the Founder Shares, one year after the completion of a Business Combination, or earlier, in either case, if, subsequent to a Business Combination, the Company completes a liquidation, merger, stock exchange or other similar transaction which results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Due from Sponsor
At the closing of the Initial Public Offering
on November 17, 2020, an aggregate amount of $
Administrative Support Agreement
The
Company has agreed, commencing on November 12, 2020 through the earlier of the Company’s consummation of a Business Combination
and its liquidation, to pay an affiliate of the Company’s management a total of $
Promissory Note — Related Party
On
August 5, 2020, the Company issued an unsecured promissory note to the Sponsor (the “Promissory Note”), pursuant to which
the Company could borrow up to an aggregate principal amount of $
13
BETTER WORLD ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Related Party Loans
In
addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or certain of the Company’s
officers and directors or their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital
Loans”). Each loan would be evidenced by promissory note. The notes may be repaid upon completion of a Business Combination, without
interest, or, at the lender’s discretion, up to $
Related Party Extension Loans
As
discussed in Note 1, the Company may extend the period of time to consummate a Business Combination up to two times, each by an additional
three months (up to May 17, 2022 to complete a Business Combination).
NOTE 7. COMMITMENTS
Registration Rights
Pursuant to a registration rights agreement entered into on November 12, 2020, the holders of the Founder Shares and Representative Shares (as defined in Notes 6 and 9, respectively), as well as the holders of the Private Warrants (and underlying securities) and any warrants issued in payment of Working Capital Loans made to Company (and underlying securities) will be entitled to registration rights. The holders of a majority of these securities are entitled to make up to two demands that the Company register such securities. The holders of the majority of the Founder Shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these shares of common stock are to be released from escrow. The holders of a majority of the Representative Shares, Private Warrants and warrants issued in payment of working capital loans made to the Company (or underlying securities) can elect to exercise these registration rights at any time after the Company consummates a Business Combination. Notwithstanding anything to the contrary, EarlyBirdCapital may only make a demand on one occasion and only during the five-year period beginning on the effective date of the registration statement of which this prospectus forms a part. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to consummation of a Business Combination; provided, however, that EarlyBirdCapital may participate in a “piggy-back” registration only during the seven-year period beginning on the effective date of the registration statement of which this prospectus forms a part. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The
Company granted the underwriters a 45-day option from the date of the Initial Public Offering to purchase up to
14
BETTER WORLD ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Business Combination Marketing Agreement
The
Company has engaged EarlyBirdCapital as an advisor in connection with a Business Combination to assist the Company in holding meetings
with its stockholders to discuss the potential Business Combination and the target business’ attributes, introduce the Company
to potential investors that are interested in purchasing the Company’s securities in connection with a Business Combination, assist
the Company in obtaining stockholder approval for the Business Combination and assist the Company with its press releases and public
filings in connection with the Business Combination.
Additionally,
the Company will pay EarlyBirdCapital a cash fee equal to
NOTE 8. STOCKHOLDERS’ (DEFICIT) EQUITY
Preferred
Stock — The Company is authorized to issue
Common
Stock — The Company is authorized to issue
NOTE 9. WARRANTS
Warrants
— The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination
or (b) 12 months from the closing of the Initial Public Offering. No warrants will be exercisable for cash unless the Company has an
effective and current registration statement covering the shares of common stock issuable upon exercise of the warrants and a current
prospectus relating to such shares of common stock. Notwithstanding the foregoing, if a registration statement covering the shares of
common stock issuable upon exercise of the Public Warrants is not effective within a specified period following the consummation of a
Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when
the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the
exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another
exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. The Public Warrants will expire
The Company may redeem the Public Warrants (excluding the Private Warrants and any warrants underlying units issued upon conversion of the Working Capital Loans):
15
BETTER WORLD ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of 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 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 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 common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance), (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 its common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its 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 greater of (i) Market Value or (ii) the price at which the Company issue the additional shares of common stock or equity-linked securities.
The Private Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Warrants and the shares of common stock issuable upon the exercise of the Private Warrants will not be transferable, assignable or saleable until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Warrants will be exercisable for cash or on a cashless basis, at the holder’s option, and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
16
BETTER WORLD ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Representative Shares
On
August 5, 2020, the Company issued to EarlyBirdCapital
The Representative Shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the effective date of the registration statement related to the Initial Public Offering pursuant to Rule 5110(g)(1) of FINRA’s NASD Conduct Rules. Pursuant to FINRA Rule 5110(g)(1), these securities will not be sold during the Initial Public Offering, or sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective date of the Initial Public Offering, except to any underwriter and selected dealer participating in the Initial Public Offering and their bona fide officers or partners, provided that all securities so transferred remain subject to the lockup restriction above for the remainder of the time period.
NOTE 10. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
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 following table presents information about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2021 and December 31, 2020, respectively, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Description | Level | September 30, 2021 | December 31, 2020 | ||||||||
| Assets: | |||||||||||
| Marketable securities held in Trust Account | 1 | $ | $ | ||||||||
| Liabilities: | |||||||||||
| Warrant liabilities – Private Warrants | 3 | ||||||||||
The Private Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the condensed balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the condensed statements of operations.
17
BETTER WORLD ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The Private Warrants are valued using a binomial lattice model. The Company allocated the proceeds received from (i) the sale of Units (which is inclusive of one share of common stock and one Public Warrant) and (ii) the sale of Private Warrants, first to the Warrants based on their fair values as determined at initial measurement, with the remaining proceeds allocated to common stock subject to possible redemption. The Warrants were classified as Level 3 at the initial measurement date due to the use of unobservable inputs.
The following are the inputs used by the Company in establishing the fair value of its Private Warrants at September 30, 2021 and December 31, 2020.
| Input | December 31, 2020 | September 30, 2021 | ||||||
| Risk-free interest rate | % | % | ||||||
| Trading days per year | ||||||||
| Expected volatility | % | % | ||||||
| Exercise price | $ | $ | ||||||
| Stock Price | $ | $ | ||||||
On
December 31, 2020 and September 30, 2021, the Private Warrants were determined to be $
The following table presents the changes in the fair value of the warrant liabilities:
| Private Placement | ||||
| Fair value as of December 31, 2020 | $ | |||
| Change in valuation inputs or other assumptions | ( | ) | ||
| Fair value as of September 30, 2021 | $ | |||
NOTE 11. SUBSEQUENT EVENTS
On November 9, 2021, the Company’s board of
directors approved the extension of the date by which the Company has to consummate a Business Combination from November 17, 2021 to February
17, 2022. In connection with the extension, the Sponsor deposited into the Trust Account $
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Based upon this review, the Company did not identify any subsequent events other than the event set forth above that would have required adjustment or disclosure in the condensed financial statements.
18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this report (the “Quarterly Report”) to “we,” “us,” “our” or the “Company” refer to Better World Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to BWA Holdings LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”).
This Management’s Discussion and Analysis of Financial Condition and Results of Operations gives effect to the restatement of our financial statements as of December 31, 2020, March 31, 2021 and June 30, 2021. Management identified errors made in its historical financial statements where, at the closing of our Initial Public Offering, we improperly valued our common subject to possible redemption. We previously determined the common stock subject to possible redemption to be equal to the redemption value of $10.00 per share of common stock while also taking into consideration a redemption cannot result in net tangible assets being less than $5,000,001. Management determined that the common stock issued during the Initial Public Offering can be redeemed or become redeemable subject to the occurrence of future events considered outside of the Company’s control. Therefore, management concluded that the redemption value should include all common stock subject to possible redemption, resulting in the common stock subject to possible redemption being equal to their redemption value. As a result, management has noted a reclassification error related to temporary equity and permanent equity. This resulted in a restatement to the initial carrying value of the common stock shares subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and common stock.
Overview
We are a blank check company formed under the laws of the State of Delaware on August 5, 2020 for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities (an “initial business combination”). We intend to effectuate our initial business combination using cash from the proceeds of the Initial Public Offering and the sale of the Private 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.
19
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from August 5, 2020 (inception) through September 30, 2021 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and 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 generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence and transaction expenses.
For the three months ended September 30, 2021, we had a net income of $1,475,730 which consists of the change in fair value of warrant liability of $2,192,941 and interest earned on marketable securities held in the Trust Account of $23,138, and unrealized loss on marketable securities held in the Trust Account of $4,654, offset by formation and operational costs of $735,695.
For the nine months ended September 30, 2021, we had a net income of $2,207,258, which consists of the change in fair value of warrant liability of $3,302,913 and interest earned on marketable securities held in the Trust Account of $58,976, and unrealized loss on marketable securities held in the Trust Account of $5,829, offset by formation and operational costs of $1,148,802.
For the period from August 5, 2020 (inception) through September 30, 2020, we had a net loss of $725, which consists of formation and operational costs.
Liquidity and Capital Resources
On November 17, 2020, we consummated the Initial Public Offering of 11,000,000 units, at $10.00 per Unit, generating gross proceeds of $110,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 4,800,000 Private Warrants at a price of $1.00 per Private Warrant in a private placement to our Sponsor and EarlyBirdCapital, Inc. generating gross proceeds of $4,800,000.
On November 19, 2020, in connection with the underwriters’ partial exercise of their over-allotment option, we consummated the sale of an additional 1,618,600 units at a price of $10.00 per unit, generating total gross proceeds of $16,186,000. In addition, we also consummated the sale of an additional 485,580 private placement warrants at $1.00 per private placement warrant, generating total gross proceeds of $485,580.
Following the Initial Public Offering, the partial exercise of the over-allotment option, and the sale of the Private Warrants, a total of $127,447,860 was placed in the Trust Account. We incurred $2,880,354 in Initial Public Offering related costs, including $2,523,720 of underwriting fees and $356,634 of other costs.
For the nine months ended September 30, 2021, cash used in operating activities was $528,273. Net income of $2,207,258 was affected by the change in fair value of warrant liability of $3,302,913, interest earned on marketable securities held in the Trust Account of $58,976, and an unrealized loss on marketable securities held in our Trust Account of $5,829. Changes in operating assets and liabilities provided $620,529 of cash for operating activities.
For the period from August 5, 2020 (inception) through September 30, 2020, cash used in operating activities was $0. Net loss of $725 was offset by the changes in operating assets and liabilities.
As of September 30, 2021, in the U.S.-based trust account (the “trust account”) maintained by Continental Stock Transfer & Trust Company, acting as trustee, we had cash held of $937 and marketable securities held in the trust account of $127,514,899 (including approximately $67,976 of interest income and unrealized gains, net of unrealized losses) consisting of securities held in a money market fund that invests in U.S. Treasury securities with a maturity of 180 days or less. Interest income on the balance in the trust account may be used by us to pay taxes. Through September 30, 2021, we did not withdraw any interest earned on the trust account to pay our taxes.
20
We intend to use substantially all of the funds held in the trust account, to acquire a target business and to pay our expenses relating thereto upon consummation of our initial business combination for assisting us in connection with our initial business combination. To the extent that our capital stock is used in whole or in part as consideration to effect an initial business combination, the remaining funds held in the trust account will be used as working capital to finance the operations of the target business. Such working capital funds could be used in a variety of ways including continuing or expanding the target business’ operations, for strategic acquisitions and for marketing, research and development of existing or new products. Such funds could also be used to repay any operating expenses or finders’ fees which we had incurred prior to the completion of our initial business combination if the funds available to us outside of the trust account were insufficient to cover such expenses.
As of September 30, 2021, we had cash of $494,905 held outside the trust account. We intend to use the funds held outside the trust account for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the initial business combination.
In order to fund working capital deficiencies or finance transaction costs in connection with an initial business combination, the Insiders, or certain of our officers and directors or their affiliates may, but are not obligated to, loan us funds as may be required. If we complete our initial business combination, we would repay such loaned amounts. In the event that our 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 $1,500,000 of such loans may be convertible into warrants, at a price of $1.00 per warrant, at the option of the lender. The units 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 an initial 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 initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such initial business combination.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2021. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
21
Contractual Obligations
The Company has agreed, commencing on November 12, 2020 through the earlier of the Company’s consummation of an initial business combination and its liquidation, to pay an affiliate of the Company’s management a total of $10,000 per month for office space, utilities and secretarial support. For the three and nine months ended September 30, 2021, the Company incurred $30,000 and $90,000 in fees for these services, respectively. At September 30, 2021 and December 31, 2020, fees of $40,000 and $20,000 are included in accounts payable and accrued expenses in the accompanying balance sheets, respectively.
The Company granted the underwriters a 45-day option from the date of IPO to purchase up to 1,650,000 additional Units to cover over-allotments, if any, at the IPO price less the underwriting discounts and commissions. On November 19, 2020, the underwriters partially exercised their over-allotment option to purchase an additional 1,618,600 units at $10.00 per unit and forfeited the remaining over-allotment option.
The Company has engaged EarlyBirdCapital as an advisor in connection with a Business Combination to assist the Company in holding meetings with its stockholders to discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities in connection with a Business Combination, assist the Company in obtaining stockholder approval for the Business Combination and assist the Company with its press releases and public filings in connection with the Business Combination. The Company will pay EarlyBirdCapital a cash fee for such services upon the consummation of a Business Combination in an amount equal to 3.5% of the gross proceeds of the Initial Public Offering, or $4,416,510, (exclusive of any applicable finders’ fees which might become payable); provided that up to 30% of the fee may be allocated at the Company’s sole discretion to other FINRA members that assist the Company in identifying and consummating a Business Combination.
Additionally, the Company will pay EarlyBirdCapital a cash fee equal to 1.0% of the total consideration payable in a Business Combination if EarlyBirdCapital introduces the Company to the target business with which the Company completes a Business Combination.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
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Warrant Liability
The Company accounts for the Private Warrants in accordance with the guidance contained in ASC 815-40-15-7D and 7F under which the Private Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Private Warrants as liabilities at their fair value and adjusts the Private 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 statements of operations. The Private Warrants for periods where no observable traded price was available are valued using a binomial lattice simulation model.
Common Stock Subject to Possible Redemption
We account for our common stock subject to possible conversion in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of our condensed balance sheets.
Net Income (Loss) per Common Share
Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Accretion associated with the redeemable shares of common stock is excluded from net income (loss) per common share as the redemption value approximates fair value.
Recent Accounting Standards
In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact, if any, that ASU2020-06 would have on its financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the fiscal quarter ended September 30, 2021. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, solely due to the material weakness over financial reporting related to the Company’s accounting for complex financial instruments our disclosure controls and procedures were not effective during the period covered by this Quarterly Report. As discussed below we have implemented a remediation plan to improve our disclosure controls and procedures.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
Except as set forth above, 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 fiscal quarter of 2021 covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We have enhanced 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 processes now 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. We offer no assurance that these initiatives will ultimately have the intended effects.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Factors that could cause our actual results to differ materially from those in this Quarterly Report include the risk factors described in our Annual Report on Form 10-K filed with the SEC. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. | |
| ** | Furnished herewith. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BETTER WORLD ACQUISITION CORP. | ||
| Date: November 22, 2021 | By: | /s/ Rosemary L. Ripley |
| Name: | Rosemary L. Ripley | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: November 22, 2021 | By: | /s/ Peter S.H. Grubstein |
| Name: | Peter S.H. Grubstein | |
| Title: | Chief Financial Officer | |
| (Principal Financial Officer) | ||
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