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 | ||
| Units, each consisting of one share of Common Stock and one-half of one redeemable warrant | ASAXU | The Nasdaq Stock Market LLC | ||
| The | ||||
| Redeemable warrants, exercisable for shares of Common Stock at an exercise price of $11.50 per share | ASAXW | 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). Yes
As
of November 23, 2021,
ASTREA ACQUISITION CORP.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2021
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Item 1. Interim Financial Statements.
ASTREA ACQUISITION CORP.
CONDENSED BALANCE SHEETS
| September 30, 2021 |
December 31, 2020 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| Deferred offering costs | ||||||||
| Cash and marketable securities held in Trust Account | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | ||||||||
| Current liabilities | ||||||||
| Accrued expenses | $ | $ | ||||||
| Promissory note – related party | ||||||||
| Total Current Liabilities | ||||||||
| Warrant liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments | ||||||||
| Stockholders’ (Deficit) Equity | ||||||||
| Preferred stock, $ |
||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Total Stockholders’ (Deficit) Equity | ( |
) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | $ | $ | ||||||
| (1) |
The accompanying notes are an integral part of the unaudited condensed financial statements.
1
ASTREA ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended September 30, 2021 |
Nine Months Ended September 30, 2021 |
For the Period from August 11, 2020 (Inception) Through September 30, 2020 |
||||||||||
| Formation and operating costs | $ | $ | $ | |||||||||
| Loss from operations | ( |
) | ( |
) | ( |
) | ||||||
| Other income (expense): | ||||||||||||
| Interest earned on marketable securities held in Trust Account | ||||||||||||
| Unrealized gain on marketable securities held in Trust Account | ||||||||||||
| Interest income – bank | ||||||||||||
| Change in fair value of warrant liability | ( |
) | ( |
) | ||||||||
| Transaction costs associated with Initial Public Offering | ( |
) | ||||||||||
| Total other expense, net | ( |
) | $ | ( |
) | |||||||
| Net loss | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| Basic and diluted weighted average shares outstanding, Common stock | $ | |||||||||||
| Basic and diluted net loss per share, Common stock | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||
The accompanying notes are an integral part of the unaudited condensed financial statements.
2
ASTREA 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 in |
Accumulated | Total Stockholders’ |
|||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity (Deficit) | ||||||||||||||||
| Balance – January 1, 2021 | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Accretion of Common Stock to redemption value | — | — | ( |
) | ( |
) | ||||||||||||||
| Sale of |
||||||||||||||||||||
| Net loss | — | ( |
) | ( |
) | |||||||||||||||
| Balance – March 31, 2021 (restated) | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Net loss | — | ( |
) | ( |
) | |||||||||||||||
| Balance – June 30, 2021 (restated) | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Net loss | — | ( |
) | ( |
) | |||||||||||||||
| Balance – September 30, 2021 | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||
FOR THE PERIOD FROM AUGUST 11, 2020 (INCEPTION) THROUGH SEPTEMBER 30, 2020
| Common Stock | Additional Paid in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance – August 11, 2020 (Inception) | $ | $ | $ | $ | ||||||||||||||||
| Issuance of common stock to Sponsor | ||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance – September 30, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
3
ASTREA ACQUISITION CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Nine Months Ended September 30, |
For the Period from August 11, 2020 (Inception) through September 30, |
|||||||
| 2021 | 2020 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Change in fair value of warrant liabilities | ||||||||
| Interest earned on marketable securities held in Trust Account | ( |
) | ||||||
| Unrealized gain on marketable securities held in Trust Account | ( |
) | ||||||
| Transaction costs incurred in connection with warrant liability | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( |
) | ||||||
| Accrued expenses | ||||||||
| Net cash used in operating activities | ( |
) | ( |
) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Investment in cash into Trust Account | ( |
) | ||||||
| Net cash used in investing activities | ( |
) | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from sale of Units, net of underwriting discounts | ||||||||
| Proceeds from sale of Private Placement Units | ||||||||
| Proceeds from promissory note | ||||||||
| 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 included in accrued offering costs | $ | $ | ||||||
| Issuance of Representative Shares/Founder Shares | $ | $ | ||||||
| Initial classification of common stock subject to possible redemption | $ | |||||||
| Accretion of common stock subject to possible redemption | $ | ( |
$ | — | ||||
| Initial classification of warrant liabilities | ( |
) | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
4
ASTREA ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Astrea Acquisition Corp. (the “Company”) was incorporated in Delaware on August 11, 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”).
The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of September 30, 2021, the Company had not commenced any operations. All activity for the period from August 11, 2020 (inception) through September 30, 2021 relates to the Company’s formation and the initial public offering (“Initial Public Offering”), which is described below, and identifying a target company for a Business Combination, which the company has done and is described below. 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 February 3, 2021. On February 8, 2021,
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 February 8, 2021, an amount of $
On
February 18, 2021, the underwriters fully exercised their over-allotment option, resulting in an additional
Transaction
costs amounted to $
5
ASTREA ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
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 Units, although substantially all of the net proceeds are intended to be applied generally toward completing
a Business Combination.
The
Company is required to provide its 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 Company has determined to provide this opportunity through a stockholder meeting in connection with its
currently planned proposed Business Combination described below. 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 $
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 its Founder Shares, Private Shares and any Public Shares held
by it in connection with the completion of a Business Combination, (b) to waive its liquidation rights with respect to the Founder
Shares and Private Shares if the Company fails to complete a Business Combination by February 8, 2023 and (c) 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
The
Company will have up until February 8, 2023 to complete a Business Combination (the “Combination Period”).
6
ASTREA ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
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 $
Liquidity and Going Concern
As of September 30, 2021, the Company had $
The Company will need to raise additional capital through loans or additional investments from its initial stockholders, officers or directors. The Company’s initial stockholders, officers or directors 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 through one year and one day from the issuance of this report. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Risks and Uncertainties
Management is currently evaluating 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 the financial statement. The financial statement does not include any adjustments that might result from the outcome of this uncertainty.
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 that the Company should restate its previous financial statements issued as at February 8th, 2021 and for the quarters ended March 30, 2021 and June 30, 2021. The Company determined, at the closing of the Company’s Initial Public Offering, the Company improperly classified its common stock subject to possible redemption. The Company previously classified a portion of the common stock subject to redemption in stockholders’ equity when it should have been recorded as temporary equity. Management determined that the Public Shares underlying the Units issued during the Initial Public Offering can be redeemed or become redeemable subject to the occurrence of future events considered outside the Company’s control. Therefore, management concluded that the redemption value should include all shares of common stock subject to possible redemption, resulting in the common stock subject to possible redemption being equal to their redemption value. This resulted in a restatement of the initial carrying value of the common stock subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and common stock.
In connection with the change in presentation
for the common stock subject to redemption, the Company also restated its earnings per share calculation to allocate net income (loss)
to its one class of common stock compared to the previous computation that allocated net income (loss) between redeemable
and non-redeemable common stock. On September 30, 2021, the company had Shares of redeemable common stock and
7
ASTREA ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
There has been no change in the Company’s total assets, liabilities or operating results as a result of the error.
The impact of the restatement on the Company’s financial statements is reflected in the following table.
| As Previously Reported | Adjustment | As Restated | ||||||||||
| Condensed Balance Sheet as of February 8, 2021 | ||||||||||||
| Common stock subject to possible redemption | $ | $ | $ | |||||||||
| Common stock | $ | $ | ( | ) | $ | |||||||
| Additional paid-in capital | $ | $ | ( | ) | $ | |||||||
| Accumulated deficit | $ | ( | ) | $ | $ | ( | ) | |||||
| Total Stockholders’ Equity (Deficit) | $ | $ | ( | ) | $ | |||||||
| Number of Shares subject to possible redemption | ||||||||||||
| Condensed Balance Sheet as of March 31, 2021 (unaudited) | ||||||||||||
| Common stock subject to possible redemption | $ | $ | $ | |||||||||
| Common stock | $ | $ | ( | ) | $ | |||||||
| Additional paid-in capital | $ | $ | $ | |||||||||
| Accumulated deficit | $ | ( | ) | $ | $ | ( | ) | |||||
| Total Stockholders’ Equity (Deficit) | $ | $ | ( | ) | $ | |||||||
| Number of Shares subject to possible redemption | ||||||||||||
| Condensed Balance Sheet as of June 30, 2021 (unaudited) | ||||||||||||
| Common stock subject to possible redemption | $ | $ | $ | |||||||||
| Common stock | $ | $ | ( | ) | $ | |||||||
| Additional paid-in capital | $ | $ | ) | $ | ||||||||
| Accumulated deficit | $ | ( | ) | $ | $ | ( | ) | |||||
| Total Stockholders’ Equity (Deficit) | $ | $ | ( | ) | $ | ( | ) | |||||
| Number of Shares subject to possible redemption | ||||||||||||
| Condensed Statement of Operations for the Three Months ended March 31, 2021 (unaudited) | ||||||||||||
| Basic and diluted weighted average shares outstanding, 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 | $ | ( | ) | $ | $ | |||||||
| Basic and diluted weighted average shares outstanding, Common stock | ||||||||||||
| Basic and diluted net loss per share, Common stock | ( | ) | ( | ) | ||||||||
| Condensed Statement of Operations for the Three Months Ended June 30, 2021 (Unaudited) | ||||||||||||
| Basic and diluted weighted average shares outstanding, 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 | $ | ( | ) | $ | ||||||||
| Basic and diluted weighted average shares outstanding, Common stock | ||||||||||||
| Basic and diluted net loss per share, Common stock | ( | ) | ( | ) | ||||||||
| Condensed Statement of Operations for the Six months ended June 30, 2021 (Unaudited) | ||||||||||||
| 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 | ( | ) | ||||||||||
| Basic and diluted weighted average shares outstanding, Common stock | ||||||||||||
| Basic and diluted net loss per share, Common stock | ( | ) | ( | ) |
| Condensed Statement of Changes in Shareholders’ Equity (Deficit) for the Three months ended March 31, 2021 (Unaudited) | ||||||||||||
| Sale of 17,250,000 units, net of underwriting discounts, offering costs and warrant liability | $ | ( | ) | |||||||||
| Accretion for common stock subject to redemption amount | $ | ( | ) | ( | ) | |||||||
| Total shareholders’ equity (deficit) | $ | $ | ( | ) | $ | |||||||
| Condensed Statement of Changes in Shareholders’ Equity (Deficit) for the Three Months ended June 30, 2021 (Unaudited) | ||||||||||||
| Total shareholders’ equity (deficit) | $ | $ | ( | ) | $ |
| Condensed Statement of Cash Flows for the Three Months Ended March 31, 2021 (Unaudited) | ||||||||||||
| Non-cash investing and financing activities | ||||||||||||
| Initial classification of common stock ordinary shares subject to possible redemption | $ | $ | $ | |||||||||
| Change in value of common stock ordinary shares subject to possible redemption | $ | ( | ) | $ | $ | |||||||
| Accretion of common stock subject to possible redemption | $ | ( | ) | $ | ( | ) | ||||||
| Condensed Statement of Cash Flows for the Six months ended June 30, 2021 (Unaudited) | ||||||||||||
| Non-cash investing and financing activities | ||||||||||||
| Initial classification of common stock ordinary shares subject to possible redemption | $ | $ | $ | |||||||||
| Change in value of common stock ordinary shares subject to possible redemption | $ | ( | ) | $ | $ | |||||||
| Accretion of common stock subject to possible redemption | $ | ( | ) | $ | ( | ) |
8
ASTREA 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 prospectus for its Initial Public Offering as filed with the SEC on February 4, 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 statement 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.
Marketable Securities Held in Trust Account
At September 30, 2021, substantially all of the assets held in the Trust Account were 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 sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are included in interest earned on marketable securities held in Trust Account in the accompanying condensed statements of operations. The estimated fair values of investments held in Trust Account are determined using available market information. At December 31, 2020, there were no assets held in the Trust Account.
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.” Shares of 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, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
9
ASTREA ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
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, the common stock reflected in the condensed balance sheet are reconciled in the following table:
| Gross proceeds | $ | |||
| Less: | ||||
| Common stock issuance costs | $ | ( | ) | |
| Plus: | ||||
| Accretion of carrying value to redemption value | $ | |||
| Common stock subject to possible redemption | $ |
Warrant Liabilities
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The fair value of the private warrants was estimated using the Binomial Lattice Model (see Note 10).
Convertible Instruments
The Company accounts for its promissory notes that feature conversion options in accordance with ASC No. 815, Derivatives and Hedging Activities (“ASC No. 815”). ASC No. 815 requires companies to bifurcate conversion options from their host instruments and account for them as freestanding derivative financial instruments according to certain criteria. The criteria includes circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) a promissory note that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement 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. 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 effective tax rate differs from the statutory tax rate of
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 share of common stock is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the respective period. Accretion associated with the redeemable shares of common stock is excluded from income (loss) per common share as the redemption value approximates fair value.
The
calculation of diluted income (loss) per common stock 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
10
ASTREA ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The following table reflects the calculation of basic and diluted net income (loss) per common share (in dollars, except per share amounts):
| Three Months Ended September 30, 2021 |
Nine Months Ended September 30, 2021 |
For the Period From August 11, 2020 (Inception) Through September 30, 2020 |
||||||||||
| Basic and diluted net income ( loss) per common stock | ||||||||||||
| Numerator: | ||||||||||||
| Allocation of net income (loss), as adjusted | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| Denominator: | ||||||||||||
| Basic and diluted weighted average shares outstanding | ||||||||||||
| Basic and diluted net income (loss) per common stock | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times may exceed the Federal Depository Insurance Coverage of $
Fair Value of Financial Instruments
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 recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.
11
ASTREA ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NOTE 4. PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold
NOTE 5. PRIVATE PLACEMENT
Simultaneously with the closing of Initial Public
Offering, the Sponsor purchased an aggregate of
NOTE 6. RELATED PARTY TRANSACTIONS
Founder Shares
On
August 11, 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 the earlier
of nine months after the date of the consummation of a Business Combination and the date on which the closing price of the Company’s
common stock equals or exceeds $
Administrative Services Agreement
The
Company entered into an agreement, commencing on February 3, 2021, through the earlier of the Company’s consummation of a Business
Combination and its liquidation, to pay the Sponsor a total of up to $
12
ASTREA ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Promissory Note — Related Party
On
August 19, 2020, the Company issued an unsecured promissory note to the Sponsor (the “Promissory Note”), pursuant to which
the Company may borrow up to an aggregate principal amount of $
Related Party Loans
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”). Such Working Capital Loans would be evidenced
by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest, or, at the lender’s discretion,
up to $
On March
17, 2021 and August 25, 2021 the Company entered into convertible promissory notes with the Sponsor pursuant to which the Sponsor
agreed to loan the Company up to an aggregate principal amount of $
The Company analyzed the conversion option imbedded in the Convertible Promissory Notes under ASC 470-20 and determined it should be accounted for as a separate derivative, however, the fair value was determined to be insignificant to the company’s financial positions and result of operations.
NOTE 7. COMMITMENTS
Registration Rights
Pursuant to a registration rights agreement entered into on February 3, 2021, the holders of the Founder Shares, Private Units and any units issued in payment of Working Capital Loans made to Company (and underlying securities) will have registration rights to require the Company to register a sale of any of our securities held by them. 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 Private Units and units issued to the Sponsor, officers, directors or their affiliates 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 consummation of a Business Combination. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination. The registration rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering our securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The
Company granted the underwriters a 45-day option to purchase up to
13
ASTREA ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Business Combination Marketing Agreement
The Company engaged EarlyBirdCapital, Inc. (“EarlyBirdCapital”), the representative of the underwriters in the Initial Public Offering, as an advisor in connection with its Business Combination to assist in holding meetings with the Company stockholders to discuss the potential Business Combination and the target business’ attributes, introduce, introduce the Company to potential investors that are interested in purchasing its securities in connection with its initial Business Combination, assist in obtaining stockholder approval for the Business Combination and assist with 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 its initial business combination in an amount equal to 3.5% of the gross proceeds of the Initial Public Offering (exclusive of any applicable finder’s fees which might become payable).
Right of First Refusal
Subject to certain conditions, the Company granted EarlyBirdCapital the right, but not the obligation, to act as book running manager, placement agent and/or arranger, as the case may be, in any and all such financing or financings. This right of first refusal extends from the date of the Initial Public Offering until the earlier of the consummation of a Business Combination or the liquidation of the Trust Account if the Company fails to consummate a Business Combination withing the Combination Period.
Agreement and Plan of Merger
On August 9, 2021, the Company entered into an Agreement and Plan of Merger, by and among Astrea, Peregrine Merger Sub, LLC (“HotelPlanner.com Merger Sub”), Lexyl Travel Technologies, LLC (“HotelPlanner.com”), Double Peregrine Merger Sub, LLC (“Reservations.com Merger Sub”), and Benjamin & Brothers, LLC (“Reservations.com”).
Following completion of the Transactions, the combined company will be organized in an umbrella partnership C corporation (“Up-C”) structure, in which (1) HotelPlanner.com will own substantially all of the assets and business of HotelPlanner.com and Reservations.com and (2) the Company, to be renamed HotelPlanner Inc., will be the holding company for the combined enterprise’s business, holding a minority of the HotelPlanner.com common units, and its assets, which currently consist of cash both within and outside of the Trust Account, will be distributed to HotelPlanner.com after payment of transactional expenses and funds to the Company’s public stockholders exercising their redemption rights described herein. Following the closing, interests in HotelPlanner.com will be the Company’s sole asset and the Company will be the sole manager of HotelPlanner.com.
The
parties have ascribed an equity value of the combined company, following the closing, of approximately $
The closing is expected to occur in the fourth quarter of 2021, following the receipt of required approval by the stockholders of Astrea, required regulatory approvals, and the fulfilment of other customary conditions.
NOTE 8. STOCKHOLDERS’ (DEFICIT) EQUITY
Preferred
Stock — The Company is authorized to issue
Common
Stock — The Company is authorized to issue
14
ASTREA ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NOTE 9. WARRANTS
Warrants
— The Public Warrants will become exercisable 30 days after the completion of a Business Combination. 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
Once the warrants become exercisable, the Company may redeem the Public Warrants (excluding the Private Warrants and any warrants underlying units issued upon conversion of the Working Capital Loans):
| ● | at a price of $0.01 per warrant; |
| ● | at any time after the warrants become exercisable; |
| ● | upon not less than 30 days’ prior written notice of redemption to each warrant holder; |
| ● | if, and only if, the reported last sale price of the shares of common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations), for any 20 trading days within a 30 trading day period ending on the third business day prior to the notice of redemption to warrant holders; and |
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) the Market Value or (ii) the price at which we 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 are 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.
15
ASTREA ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
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 indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Description | Level | September 30, 2021 | ||||||
| Assets: | ||||||||
| Marketable securities held in Trust Account | 1 | $ | ||||||
| Liabilities: | ||||||||
| Warrant Liability – Private Placement Warrants | 3 | $ | ||||||
The Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the 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 consolidated statements of operations.
16
ASTREA ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Initial Measurement
The Company established the initial fair value for the Warrants on February 8, 2021, the date of the Company’s Initial Public Offering, using a binomial lattice model for the Public Warrants. The Company allocated the proceeds received from (i) the sale of Units (which is inclusive of one share of Common Stock and one-half of one Redeemable Warrant), and 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 based on their relative fair values at the initial measurement date. The Warrants were classified as Level 3 at the initial measurement date due to the use of unobservable inputs.
The key inputs into binomial lattice model for the Private Warrants were as follows at initial measurement:
| Input | February 8, 2021 (Initial Measurement) | |||
| Risk-free interest rate | % | |||
| Effective expiration date | ||||
| Dividend yield | % | |||
| Expected volatility | % | |||
| Exercise price | $ | |||
| Unit Price | $ | |||
Subsequent Measurement
The Warrants are measured at fair value on a recurring basis. The subsequent measurement of the Private Warrants was calculated using a binomial lattice model which is considered a Level 3 measurement.
The key inputs into the binomial lattice model for the Private Warrants were as follows at September 30, 2021:
| Input | ||||
| Risk-free interest rate | % | |||
| Effective expiration date | ||||
| Dividend yield | % | |||
| Expected volatility | % | |||
| Exercise price | $ | |||
| Unit Price | $ | |||
17
ASTREA ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The following table presents the changes in the fair value of warrant liabilities:
| Private Warrant Liability | ||||
| Fair value as of August 11, 2020 | $ | |||
| Initial measurement on February 8, 2021 (IPO) | ||||
| Initial measurement on February 18, 2021 (Over allotment) | ||||
| Change in valuation inputs or other assumptions | ||||
| Fair value as of September 30, 2021 | $ | |||
Level 3 financial liabilities consist of the Private Warrant liability for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate. There were no transfers between levels during the three and nine months ended September 30, 2021.
NOTE 11. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, other than outlined below, the Company did not identify any other subsequent events that would have required adjustment or disclosure in the financial statements.
Related Party Promissory Note
On October 5, 2021, the Company issued an additional
unsecured promissory note to the Sponsor (the “Promissory Note”) for $
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” or the “Company” refer to Astrea Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Astrea Acquisition Sponsor, 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” regarding the completion of the Proposed Business Combination (as defined below), 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, including that the conditions of the Proposed Business Combination are not satisfied. 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 final prospectus for its Initial Public Offering filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations has been amended and restated to give effect to the restatement of our financial statements as of 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 classified our common stock subject to possible redemption. The Company determined, at the closing of the Company’s Initial Public Offering, the Company improperly classified its common stock subject to possible redemption. The Company previously classified a portion of the common stock subject to redemption in stockholder equity when it should have been recorded as temporary equity. Management determined that the Public Shares underlying the Units issued during the Initial Public Offering can be redeemed or become redeemable subject to the occurrence of future events considered outside 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 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 11, 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 (the “Business Combination”). We intend to effectuate our Business Combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Placement Units, our capital stock, debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from August 11, 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 expenses.
For the three months ended September 30, 2021, we had a net loss of $797,811, which consists of a change in fair value of warrant liability of $239,875, interest earned from the bank of $2, interest earned on marketable securities held in the Trust Account of $19,788, and unrealized gain on marketable securities held in Trust Account of $545, offset by formation and operational costs of $578,271.
19
For the nine months ended September 30, 2021, we had a net loss of $1,247,370, which consists of transaction costs associated with the Initial Public Offering of $567, change in fair value of warrant liability of $209,000, interest income from the bank of $8, interest earned on marketable securities held in the Trust Account of $49,479 and unrealized gain on marketable securities held in the Trust Account of $545, offset by formation and operational costs of $1,087,835.
For the period from August 11, 2020 (inception) through September 30, 2020, we had a net loss of $177, which consists of formation and operational costs.
Liquidity and Capital Resources
On February 8, 2021, we consummated the Initial Public Offering of 15,000,000 Units at $10.00 per Unit, generating gross proceeds of $150,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 430,000 Private Placement Unit a price of $10.00 per Private Placement Unit in a private placement to the Sponsor generating gross proceeds of $4,300,000.
On February 18, 2021, in connection with the underwriters’ exercise of their over-allotment option in full, we consummated the sale of an additional 2,250,000 Units at a price of $10.00 per Unit, generating total gross proceeds of $22,500,000. In addition, we also consummated the sale of an additional 45,000 Private Units at $10.00 per Private Unit, generating total gross proceeds of $450,000.
Following the Initial Public Offering, the full exercise of the over-allotment option, and the sale of the Private Units, a total of $172,500,000 was placed in the Trust Account. We incurred $3,916,059 in Initial Public Offering related costs, including $3,450,000 of underwriting fees and $466,059 of other costs.
For the nine months ended September 30, 2021, cash used in operating activities was $1,232,202. Net loss of $1,247,370 was affected by interest earned on marketable securities held in the Trust Account of $49,479, unrealized gain on marketable securities held in the Trust Account of $545, change in fair value of warrant liability of $209,000 and transaction costs associated with the Initial Public Offering of $567. Changes in operating assets and liabilities used $144,375 of cash for operating activities.
For the period from August 11, 2020 (inception) through September 30, 2020, cash used in operating activities was $177 which consists of the net loss.
As of September 30, 2021, we had marketable securities held in the Trust Account of $172,550,024 (including $50,024 of interest income) consisting of U.S. Treasury Bills with a maturity of 185 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 have not withdrawn any interest earned from the Trust Account.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less income taxes payable), to complete our Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of September 30, 2021, we had cash of $51,562. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor, 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 a Business Combination, we would repay such loaned amounts. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into units at a price of $10.00 per unit, at the option of the lender. The units would be identical to the Private Units.
For the three months ended September 30, 2021, we determined that there was substantial doubt about our ability to continue as a going concern through one year from the date of the September 30, 2021 report. The Company will need to raise additional capital through loans or additional investments from its initial stockholders, officers or directors. The Company’s initial stockholders, officers or directors 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 resulted in the conclusion that there is substantial doubt about the Company’s ability to continue as a going concern through one year and one day from the issuance of this report. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern. The Sponsor has committed to provide the Company with an aggregate of up to $400,000 in loans through August 16, 2022 if needed.
20
Off-Balance Sheet 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.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay the Sponsor a total of up to $10,000 per month for office space, utilities and secretarial support services. We began incurring these fees on February 3, 2021 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and our liquidation.
The Company engaged EarlyBirdCapital, Inc. (“EarlyBirdCapital”), the representative of the underwriters in the Initial Public Offering, as an advisor in connection with its Business Combination to assist in holding meetings with the Company stockholders to discuss the potential Business Combination and the target business’ attributes, introduce, introduce the Company to potential investors that are interested in purchasing its securities in connection with its initial Business Combination, assist in obtaining stockholder approval for the Business Combination and assist with 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 its initial business combination in an amount equal to 3.5% of the gross proceeds of the Initial Public Offering (exclusive of any applicable finder’s fees which might become payable).
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:
Convertible Instruments
The Company accounts for its promissory notes that feature conversion options in accordance with ASC No. 815, Derivatives and Hedging Activities (“ASC No. 815”). ASC No. 815 requires companies to bifurcate conversion options from their host instruments and account for them as freestanding derivative financial instruments according to certain criteria. The criteria includes circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) a promissory note that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
Warrant Liabilities
We account for the Warrants in accordance with the guidance contained in ASC 815-40 under which the Private Placement Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the Private Placement Warrants as liabilities at their fair value and adjust the Private Placement 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 Placement Warrants are valued using binomial lattice model.
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.” Shares of 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, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
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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. Net income (loss) per share of common stock is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the respective period. Accretion associated with the redeemable shares of common stock is excluded from 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 ASU2020-06would have on its financial position, results of operations or cash flows.
The Company’s 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 accompanying unaudited condensed financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation and in light of the material weakness in internal controls described below, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were not effective, due solely to the material weakness in our internal control over financial reporting related to the Company’s accounting for complex financial instruments. Due to the significance of the risk of material missatatement that the accounting for complex financial instruments has on our financial statements, we determined this to be a material weakness. In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10 Q present fairly in all material respects to our financial positions, results of operations and cash flows for the periods presented.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter of 2021 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. However, as management has identified a material weakness in our internal control over financial reporting, due solely to the material weakness in our internal control over financial reporting related to the Company’s accounting for complex financial instruments , the Company intends to address this material weakness by enhancing its processes to identify and appropriately apply applicable accounting requirements to better evaluate its research and understanding of the nuances of the complex accounting standards that apply to its financial statements. The Company’s current plans include providing enhanced access to accounting literature, research materials and documents and increased communication among its personnel and third-party professionals with whom it consults regarding complex accounting applications. The Company has also retained the services of a valuation expert to assist in valuation analysis of the Warrants on a quarterly basis.
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PART II - OTHER INFORMATION
Item 1A. Risk Factors
As of the date of this Quarterly Report, there have been no material changes with respect to those risk factors previously disclosed in our Final Prospectus, dated February 3, 2021 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, except as set forth below. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
We identified a material weakness in our internal control over financial reporting relating to our complex financial instruments. This material weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our management also evaluates the effectiveness of our internal controls and we will disclose any changes and material weaknesses identified through such evaluation in those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
As described elsewhere in this report, in connection with the preparation of our financial statements as of September 30, 2021, management identified errors made in our historical financial statements where we improperly classified some of our common stock 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 that a redemption cannot result in net tangible assets being less than $5,000,001 pursuant to our amended and restated certificate of incorporation. Management determined that the common stock issued during our initial public offering can be redeemed or become redeemable subject to the occurrence of future events considered outside our control. Therefore, management concluded that temporary equity should include all shares of common stock subject to possible redemption. As a result, management has noted a classification error related to temporary equity and permanent equity. This resulted in a restatement to the initial carrying value of the common stock subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and common stock. Management concluded that the foregoing constituted a material weakness as of September 30, 2021.
As a result, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented. However, we cannot assure you that the foregoing will not result in any future material weaknesses or deficiencies in internal control over financial reporting. Even though we have strengthened our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On February 8, 2021, we consummated the Initial Public Offering of 15,000,000 Units. The Units were sold at an offering price of $10.00 per unit, generating total gross proceeds of $150,000,000. EarlyBirdCapital, Inc. acted as sole book-running manager of the Initial Public Offering. The securities in the offering were registered under the Securities Act on registration statement on Form S-1 (No. 333-252010). The Securities and Exchange Commission declared the registration statements effective on February 3, 2021.
Simultaneous with the consummation of the Initial Public Offering, the Sponsor consummated the private placement of an aggregate of 430,000 Units at a price of $10.00 per Private Unit, generating total proceeds of $4,300,000. Each Private Unit consists of one share of common stock (“Private Share”) and one-half of one redeemable warrant (“Private Warrant”). Each whole Private Warrant is exercisable to purchase one share of common stock at an exercise price of $11.50 per share. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The Private Warrants are identical to the warrants underlying the Units sold in the Initial Public Offering, except that the Private Warrants are not transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions.
On February 18, 2021, the underwriters exercised their over-allotment option in full, resulting in the sale of an additional 2,250,000 Units for gross proceeds of $22,500,000, less the underwriters’ discount of $450,000. In connection with the underwriters’ exercise of their over-allotment option, the Company also consummated the sale of an additional 45,000 Private Units at $10.00 per Private Unit, generating total proceeds of $450,000. A total of $22,500,000 was deposited into the Trust Account.
Of the gross proceeds received from the Initial Public Offering, the exercise of the over-allotment option and the Private Units, an aggregate of $172,500,000 was placed in the Trust Account.
We paid a total of $3,450,000 in underwriting discounts and commissions and $466,059 for other costs and expenses related to the Initial Public Offering.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.
Item 5. Other Information
On August 16, 2021, the Sponsor committed to provide the Company with an aggregate of up to $400,000 in loans through August 16, 2022 if needed. Any loan made pursuant to this commitment will be non-interest bearing, unsecured and will be repaid upon the consummation of an initial business combination or converted into units at the option of the holder. If the Company does not consummate an initial business combination, all amounts loaned to the Company will be forgiven except to the extent that it has funds available outside of the Trust Account to repay such loans. As of September 30, 2021, no amounts were drawn under this commitment. As indicated above, upon consummation of a business combination, the holder will have the option, but not the obligation, to convert the principal balance of the note, in whole or in part, into units (the “Units”) of the Company, each Unit comprised of one share of the Company’s common stock and one-half of one warrant to purchase a share of the Company’s common stock at an exercise price of $11.50 per share, at a price of $10.00 per Unit. The Units issued as a result of conversion of the Note will be identical to the units issued by the Company in its initial public offering except that the warrants underlying the Units (i) will not be redeemable by the Company and (ii) may be exercised for cash or on a cashless basis so long as they are held by the initial holder or its permitted transferees.
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| + | Incorporated by reference from the Company’s Current Report on Form 8-K dated August 9, 2021 and filed with the SEC on August 11, 2021. |
| * | Filed 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.
| ASTREA ACQUISITION CORP. | ||
| Date: November 23, 2021 | By: | /s/ Felipe Gonzalez |
| Name: | Felipe Gonzalez | |
| Title: | Chief Executive Officer and Director | |
| (Principal Executive Officer) | ||
| Date: November 23, 2021 | By: | /s/ Jose Luis Cordova |
| Name: | Jose Luis Cordova | |
| Title: | Chief Financial Officer and Director | |
| (Principal Financial and Accounting Officer) | ||
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