UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from ________ to ________
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification Number) |
| | ||
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including
area code:
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class: | Trading Symbol: | Name of Each Exchange on Which Registered: | ||
| Units, each consisting of one share of Class A Common Stock and one-half of one Redeemable Warrant | TMAC.U | The New York Stock Exchange | ||
| Redeemable Warrants, each whole warrant exercisable for one share of Class A Common Stock at an exercise price of $11.50 | TMAC WS | The New York Stock Exchange |
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
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, smaller reporting company, or an emerging growth company. See the 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 10, 2022,
THE MUSIC ACQUISITION CORPORATION
QUARTERLY REPORT ON FORM 10-Q
Table of Contents
i
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
THE MUSIC ACQUISITION CORPORATION
CONDENSED BALANCE SHEETS
| September 30, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| Assets: | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Prepaid expenses, non-current | ||||||||
| Investments held in trust account | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities, Common Stock subject to possible redemption, and Stockholders’ Deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Income taxes payable | ||||||||
| Working capital loans | ||||||||
| Total current liabilities | ||||||||
| Deferred underwriting fee | ||||||||
| Warrant liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Common Stock subject to possible redemption, $0.0001 par value, | ||||||||
| Stockholders’ Deficit: | ||||||||
| Preferred stock, $ | ||||||||
| Class A common stock, $ | ||||||||
| Class B common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities, Common Stock subject to possible redemption and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
THE MUSIC ACQUISITION CORPORATION
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Formation and operating costs | $ | $ | $ | $ | ||||||||||||
| Loss from Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income: | ||||||||||||||||
| Interest earned on cash and investments held in Trust Account | ||||||||||||||||
| Offering costs allocated to warrants | ( | ) | ||||||||||||||
| Change in fair value of warrant liability | ||||||||||||||||
| Total other income, net | ||||||||||||||||
| Income before provision for income taxes | ||||||||||||||||
| Provision for income taxes | ( | ) | ( | ) | ||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
THE MUSIC ACQUISITION CORPORATION
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
| Class A Common stock | Class B Common stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance as of January 1, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance as of March 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Accretion of Class A common stock subject to possible redemption | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance as of June 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Accretion of Class A common stock subject to possible redemption | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | — | — | — | |||||||||||||||||||||||||
| Balance as of September 30, 2022 | — | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
| Class A Common stock | Class B Common stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance as of January 1, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Accretion of Class A common stock subject to possible redemption | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Excess cash proceeds from Private Placement over fair value of Private Warrants liability | — | — | ||||||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance as of March 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of June 30, 2021 | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance as of September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
THE MUSIC ACQUISITION CORPORATION
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
| For the Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from Operating Activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Interest earned on investments held in Trust Account | ( | ) | ( | ) | ||||
| Change in fair value of warrant liabilities | ( | ) | ( | ) | ||||
| Offering costs allocated to warrants | ||||||||
| Changes in current assets and current liabilities: | ||||||||
| Prepaid assets | ( | ) | ||||||
| Other noncurrent assets | ( | ) | ||||||
| Income taxes payable | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Investment held in Trust Account | ( | ) | ||||||
| Amounts withdrawn from Trust | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash flows from Financing Activities: | ||||||||
| Proceeds from sale of Units, net of underwriting discount | ||||||||
| Proceeds from issuance of Private Placement Warrants | ||||||||
| Proceeds from working capital loans | ||||||||
| Proceeds from promissory note – related party | ||||||||
| Repayment of promissory note – related party | ( | ) | ||||||
| Payment of deferred offering costs | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ( | ) | ||||||
| Cash, beginning of the period | ||||||||
| Cash, end of the period | $ | $ | ||||||
| Supplemental disclosure of noncash investing and financing activities: | ||||||||
| Deferred underwriters’ discount payable charged to additional paid-in capital | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
THE MUSIC ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1 — Organization and Business Operations
The Music Acquisition Corporation (the “Company”) is a newly organized blank check company incorporated as a Delaware corporation on October 14, 2020. The Company was formed for the purpose of effecting a merger, stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (“Business Combination”).
As of September 30, 2022, the Company had not commenced any operations. All activity through September 30, 2022 relates to the Company’s formation and the Initial Public Offering (“IPO”) 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 generates non-operating income in the form of interest income from the proceeds derived from the IPO.
The registration statement for the Company’s
IPO was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on February 2, 2021 (the “Effective
Date”). On February 5, 2021, the Company consummated the IPO of
Simultaneously with the closing of the IPO, the
Company consummated the sale of
Transaction costs of the IPO amounted to $
Following the closing of the IPO on February 5,
2021, $
The Company’s Business Combination must
be with one or more operating businesses or assets with a fair market value equal to at least
The Company will provide its public holders of its outstanding public shares (the “public stockholders”) with the opportunity to redeem all or a portion of their public shares upon the completion of the initial Business Combination either (i) in connection with a stockholder meeting called to approve the initial Business Combination or (ii) without a stockholder vote by means of a tender offer. Except for as required by applicable law or stock exchange listing requirements, the decision as to whether the Company will seek stockholder approval of a proposed Business Combination or conduct a tender offer will be made by the Company, solely in its discretion.
5
The stockholders will be entitled to redeem their
shares for a pro rata share of the aggregate amount then on deposit in the Trust Account calculated as of two business days prior to the
consummation of the initial Business Combination, including interest earned on the funds held in the Trust Account (net of amounts which
may be withdrawn to pay taxes), divided by the number of then outstanding public shares, subject to the limitations described in the prospectus.
The amount in the Trust Account is initially anticipated to be $
The Company will have only 24 months from the
closing of the IPO to complete an initial Business Combination (the “Combination Period”). However, if the Company does not
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 its taxes (less up to $
The Company’s initial stockholders, officers and directors have agreed to (i) waive their redemption rights with respect to any Founder Shares (as defined below) and public shares they hold in connection with the completion of the initial Business Combination, (ii) waive their redemption rights with respect to any Founder Shares and public shares they hold in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation, (iii) waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares they hold if the Company fails to complete the initial Business Combination within the Combination Period, and (iv) vote any Founder Shares and any public shares held by them in favor of the Company’s initial Business Combination.
Liquidity, Capital Resources and Going Concern
The Company’s liquidity needs up to February
5, 2021 had been satisfied through a capital contribution from the Sponsor of $
6
On February 25, 2022, (i) Neil Jacobson, the Company’s
Chief Executive Officer and a manager of Music Acquisition Sponsor, LLC, the Sponsor, and (ii) Todd Lowen, the Company’s Chief Financial
Officer and Chief Operating Officer and a manager of the Sponsor, (each, a “Lender” and collectively, the “Lenders”),
each loaned $
As of September 30, 2022, the Company had $
As of September 30, 2022, the Company’s
liquidity needs have been satisfied through a payment of $
As of September 30, 2022 and December 31, 2021,
there were $
The Company has determined that a Business Combination will not take place within the Combination Period, so there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and mandatory liquidation, should an initial Business Combination not occur, and potential subsequent dissolution 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 5, 2023. The Company expects to complete the Mandatory Redemption (as defined below) on or around December 2, 2022, if stockholders approve the Proposals (as defined below).
Risks and Uncertainties
Management is continuing to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that it could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy are not determinable as of the date of these unaudited condensed financial statements. The specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these unaudited condensed financial statements.
On August 16, 2022, the Inflation Reduction Act
of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise
tax on certain repurchases (including redemptions) of stock by publicly traded domestic (i.
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.
7
Note 2 — Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements of the Company are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K filed by the Company with the SEC on March 24, 2022. The interim results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future period.
Emerging Growth Company Status
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 auditor 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 unaudited condensed financial statements in conformity with GAAP requires 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 unaudited condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates.
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 unaudited condensed 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 unaudited condensed financial statements is the determination of the fair value of the warrant liability. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. As of September 30, 2022 and December 31, 2021,
the Company had $
Investments Held in Trust Account
At September 30, 2022 and December 31, 2021, the
assets held in the Trust Account were held in money market funds which invest in U.S. Treasury securities, and are presented at fair value
based upon the quoted market price (see Note 8). During the nine months ended September 30, 2022 and 2021, the Company withdrew $
Concentration of Credit Risk
8
Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to FASB ASC Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”).
The Public Warrants and Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the carrying value of the instruments to fair value at each reporting period until they are exercised. The initial fair value of the Public Warrants issued in connection with the IPO and the fair value of the Private Placement Warrants were estimated using the Monte Carlo simulation model and Black Scholes model, respectively. The fair value of the Public Warrants as of September 30, 2022 is based on observable listed prices for such warrants. The fair value of the Private Placement Warrants as of September 30, 2022 and December 31, 2021 was estimated using the Monte Carlo simulation model. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Offering Costs Associated with the Initial Public Offering
The Company complies with the requirements of ASC 340-10-S99-1. Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the IPO that were directly related to the IPO. Offering costs are allocated to the separable financial instruments issued in the IPO based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities are expensed as incurred, presented as non-operating expenses in the unaudited condensed statements of operations. Offering costs associated with the Class A common stock were charged to temporary equity upon the completion of the IPO. The Company classifies deferring underwriting commissions as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Class A Common Stock Subject to Possible Redemption
All the shares of Class A common stock sold as part of the Units in the IPO contain a redemption feature which allows for the redemption of such public shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the initial Business Combination and in connection with certain amendments to the Company’s amended and restated certificate of incorporation. In accordance with the SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to possible redemption to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all the entity’s equity instruments, are excluded from the provisions of ASC 480. Accordingly, at September 30, 2022 and December 31, 2021, all shares of Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ deficit section of the Company’s condensed balance sheets, respectively.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the Class A common stock subject to possible redemption to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security. Effective with the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
The Class A common stock subject to possible redemption reflected on the condensed balance sheets as of September 30, 2022 and December 31, 2021 is reconciled in the following table:
| Gross Proceeds | $ | |||
| Less: | ||||
| Proceeds allocated to Public Warrants | ( | ) | ||
| Class A common stock issuance costs | ( | ) | ||
| Plus: | ||||
| Accretion of carrying value to redemption value | ||||
| Class A common stock subject to possible redemption – December 31, 2021 | ||||
| Plus: | ||||
| Accretion of carrying value to redemption value | ||||
| Class A common stock subject to possible redemption – September 30, 2022 | $ |
9
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the unaudited condensed financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of September 30, 2022 and December 31, 2021, the Company’s deferred tax asset had a full valuation allowance recorded against it.
ASC 740-270-25-2 requires that an annual effective
tax rate be determined and such annual effective rate applied to year to date income in interim periods under ASC 740-270-30-5. The Company’s
effective tax rate was
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position 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. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
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, 2022 and December 31, 2021. 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 has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Net Income Per Common Stock
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding during the period, excluding stocks subject to forfeiture. The calculation of diluted income (loss) per common share does not consider the effect of the warrants issued since the exercise of the warrants are contingent upon the occurrence of future events. However, the diluted earnings (loss) per share calculation includes the shares subject to forfeiture from the first day of the interim period in which the contingency on such shares was resolved (at least for this one because it resolved this year).
Basic and diluted net income (loss) per share for Class A common stock and Class B common stock is calculated by dividing net income (loss) attributable to the Company by the weighted average number of shares of Class A common stock and shares of Class B common stock outstanding, allocated proportionally to each class of common stock. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
Reconciliation of Net Income per Common Stock
Basic and diluted income per share for Class A common stock and for Class B common stock is calculated as follows:
| For The Three Months Ended September 30, | For The Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Net Income per share for Class A common stock: | ||||||||||||||||
| Allocation of net income to Class A common stock | $ | $ | $ | $ | ||||||||||||
| Weighted Average Shares, Class A common stock | ||||||||||||||||
| Basic and diluted net income per share | $ | $ | $ | $ | ||||||||||||
| Net Income per share for Class B common stock: | ||||||||||||||||
| Allocation of net income to Class B common stock | $ | $ | $ | $ | ||||||||||||
| Basic and diluted weighted Average Shares, Class B common stock | ||||||||||||||||
| Basic and diluted net income per share | $ | $ | $ | $ | ||||||||||||
10
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature except for warrant liabilities (see Note 8).
The Company follows the guidance in ASC 820, “Fair Value Measurement,” 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 — | Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment. |
| Level 2 — | Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means. |
| Level 3 — | Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
See Note 8 for additional information on assets and liabilities measured at fair value.
Convertible Promissory Note
The Company accounts for the Notes under ASC 815. Under 815-15-25, the election can be at the inception of a financial instrument to account for the instrument under the fair value option under ASC 825. The Company has made such election for the Notes. Using the fair value option, each Notes is required to be recorded at its initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the Notes are recognized as a non-cash gain or loss on the unaudited condensed statements of operations (see Note 5).
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
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Note 3 — Initial Public Offering
Public Units
On February 5, 2021, the Company sold
Public Warrants
Each whole warrant entitles the holder to purchase one share of the Company’s Class A common stock at a price of $11.50 per share, subject to adjustment as discussed herein. The warrants will become exercisable on the later of 12 months from the closing of the IPO or 30 days after the completion of its initial Business Combination and will expire five years after the completion of the Company’s initial Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation. In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A 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 Company’s initial stockholders or their affiliates, without taking into account any Founder Shares held by the Company’s initial stockholders or their affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s Class A common stock during the 20 trading day period starting on the trading day after the day on which the Company consummates the initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described below under “Redemption of warrants” will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, or valid exemption from registration is available. No warrant will be exercisable, and the Company will not be obligated to issue a share of Class A common stock upon exercise of a warrant unless the share of Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In no event will the Company be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a Unit containing such warrant will have paid the full purchase price for the Unit solely for the share of Class A common stock underlying such Unit.
The Company has agreed that as soon as practicable, but in no event later than fifteen (15) business days after the closing of the initial Business Combination, it will use its reasonable best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A common stock issuable upon exercise of the warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the sixtieth (60th) business day after the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, it will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
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Once the warrants become exercisable, the Company may call the Public Warrants for redemption:
| ● | in whole and not in part; | |
| ● | at a price of $ | |
| ● | upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and | |
| ● | if, and only if, the last reported sale price of the Class A common stock equals or exceeds $ |
If the Company calls the warrants for redemption as described above, the Company will have the option to require any holder that wishes to exercise his, her or its warrant to do so on a “cashless basis.” If the Company takes advantage of this option, all holders of warrants would pay the exercise price by surrendering their warrants in exchange for a number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of (A) the number of shares of Class A common stock underlying the warrants and (B) the excess of the “fair market value” of the Company’s Class A common stock (defined in the next sentence) over the exercise price of the warrants by (y) the fair market value. The “fair market value” will mean the average last reported sales price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
Note 4 — Private Placement
Simultaneously with the closing of the IPO, the
Sponsor purchased an aggregate of
The Private Placement Warrants are identical to the Public Warrants sold in the IPO except that the Private Placement Warrants, so long as they are held by the initial stockholders or its permitted transferees, (i) they will not be redeemable by the Company for cash, (ii) they (including the Class A common stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold until 30 days after the completion of the Company’s initial Business Combination, and (iii) they may be exercised by the holders on a cashless basis. If the Private Placement Warrants are held by holders other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the warrants included in the Units sold in the IPO.
Note 5 — Related Party Transactions
Founder Shares
On November 25, 2020, the Sponsor paid $
The Sponsor has agreed not to transfer, assign or sell any of its Founder Shares (subject to certain limited exceptions) until the earlier to occur of (i) one year after the completion of the Company’s initial Business Combination or (ii) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction after the initial Business Combination that results in all of the Company’s stockholders having the right to exchange their Class A common stock for cash, securities or other property (the “Lock-up”). Notwithstanding the foregoing, if (A) the last reported sales price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination or (B) the Company consummates a transaction after the initial Business Combination which results in its stockholders having the right to exchange their shares for cash, securities or other property, the Founder Shares will be released from the Lock-up.
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Promissory Note — Related Party
On November 25, 2020, the Company issued an unsecured
promissory note to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount of $
Related Party Working Capital Loans
In order to fund working capital deficiencies
or finance transaction costs in connection with an intended initial Business Combination, the Sponsor or an affiliate of the Sponsor or
certain of the Company’s officers and directors or their respective affiliates may, but are not obligated to, loan the Company funds
as may be required on a non-interest basis (“Working Capital Loans”). If the Company completes a Business Combination, the
Company will repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working
Capital Loans would be repaid only out of funds held outside of the Trust Account. In the event that a Business Combination does not close,
the Company may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans but no proceeds
from the Trust Account would be used to repay the Working Capital Loans. Up to $
On February 25, 2022, (i) Neil Jacobson, the Company’s
Chief Executive Officer and a manager of Music Acquisition Sponsor, LLC, the Sponsor, and (ii) Todd Lowen, the Company’s Chief Financial
Officer and Chief Operating Officer and a manager of the Sponsor, (each, a “Lender” and collectively, the “Lenders”),
each loaned $140,000 for a total of $280,000 to the Company. These borrowings were memorialized by the execution of two unsecured promissory
notes (the “Notes”) issued by the Company to the Lenders, under each of which the Company may borrow in the principal amount
of up to $250,000, for up to a total of $500,000, of Working Capital Loans.
Administrative Service Fee
The Company agreed to pay an affiliate of the
Company’s Sponsor a monthly fee of $
For the three months and nine months ended September
30, 2021, the Company has incurred and paid administrative service fees of $
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Note 6 — Commitments and Contingencies
Registration and Stockholder Rights
The holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans will be entitled to registration rights pursuant to a registration rights agreement dated as of February 2, 2021 by and between the Company and the parties thereto, requiring the Company to register such securities and any other securities of the Company acquired by them prior to the consummation of the initial Business Combination for resale. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, the holders have certain “piggy-back” registration rights to include their securities in other registration statements filed by the Company.
Underwriting Agreement
The underwriters had a 45-day option from the
date of the IPO to purchase up to an aggregate of
The underwriters are entitled to deferred underwriting
fees of
Note 7 — Stockholders’ Deficit
Preferred Stock — The Company
is authorized to issue a total of
Class A Common Stock — The
Company is authorized to issue a total of
Class B Common Stock — The
Company is authorized to issue a total of
The shares of Class B common stock will automatically
convert into shares of the Company’s Class A common stock at the time of the closing of its initial Business Combination on a one-for-one
basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further
adjustment as provided herein. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or
deemed issued in connection with the initial Business Combination, the number of shares of Class A common stock issuable upon conversion
of all Founder Shares will equal, in the aggregate, on an as-converted basis,
Stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders. Holders of the Class A common stock and holders of the Class B common stock will vote together as a single class on all matters submitted to a vote of the Company’s stockholders except as required by law. Unless specified in the Company’s amended and restated certificate of incorporation, or as required by applicable provisions of the Delaware General Corporation Law or applicable stock exchange rules, the affirmative vote of a majority of the Company’s shares of common stock that are voted is required to approve any such matter voted on by the Company’s stockholders.
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Note 8 — Fair Value Measurements
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| September 30, | Quoted Prices In Active Markets | Significant Other Observable Inputs | Significant Other Unobservable Inputs | |||||||||||||
| 2022 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| U.S. Money Market held in Trust Account | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Working Capital Loan | $ | $ | $ | $ | ||||||||||||
| Public Warrants Liability | — | |||||||||||||||
| Private Placement Warrants Liability | ||||||||||||||||
| $ | $ | — | $ | $ | ||||||||||||
| December 31, | Quoted Prices In Active Markets | Significant Other Observable Inputs | Significant Other Unobservable Inputs | |||||||||||||
| 2021 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| U.S. Money Market held in Trust Account | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Public Warrants Liability | ||||||||||||||||
| Private Placement Warrants Liability | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
The fair value of the working capital loans evidenced by the Notes is based on recent transactions and as a result, there were no unobservable inputs that have been internally developed by the Company which need to be disclosed. There have been no changes in fair value for the period.
The Warrants are 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 unaudited condensed statements of operations.
The Company established the initial fair value of the Public Warrants and Private Placement Warrants on February 5, 2021, the date of the Company’s IPO, using a Monte Carlo simulation model and Black Scholes model, respectively. The Public Warrants and Private Placement Warrants were classified as Level 3 at the initial measurement date. As of September 30, 2022 and 2021, the Public Warrants were classified as Level 1 due to use of the observed trading price of the separated Public Warrants, and the Private Placement Warrants were classified as Level 3 due to the use of unobservable inputs.
The following table presents the changes in the fair value of Level 3 warrant liabilities for the nine months ended September 30, 2022 and 2021:
| Private Placement Warrants | ||||
| Fair Value as of December 31, 2021 | $ | |||
| Change in valuation as of March 31, 2022 | ( | ) | ||
| Fair Value as of March 31, 2022 | ||||
| Change in valuation as of June 30, 2022 | ( | ) | ||
| Fair Value as of June 30, 2022 | ||||
| Change in valuation as of September 30, 2022 | ( | ) | ||
| Fair Value as of September 30, 2022 | $ | |||
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| Private Placement Warrants | ||||
| Fair Value as of December 31, 2020 | $ | |||
| Initial measurement on February 5, 2021 | ||||
| Change in valuation as of March 31, 2022 | ( | ) | ||
| Fair Value as of March 31, 2022 | ||||
| Change in valuation | ||||
| Fair Value as of June 30, 2021 | ||||
| Change in valuation | ( | ) | ||
| Fair Value as of September 30, 2021 | $ | |||
Level 3 inputs have inherent uncertainties that are involved. If factors or assumptions change, the estimated fair values could be materially different. The key inputs into the Black-Scholes simulation as of September 30, 2022 and December 31, 2021 were as follows:
| Inputs | September 30, 2022 | December 31, 2021 | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected term remaining (years) | ||||||||
| Expected volatility | % | % | ||||||
| Underlying stock price | $ | $ | ||||||
Transfers to/from Levels 1, 2 and 3 are recognized
at the end of the reporting period. The estimated fair value of the Public Warrants of $
Note 9 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.
On November 3, 2022, The Music Acquisition Corporation (the “Company”) filed a definitive proxy statement relating to a special meeting of stockholders in lieu of the 2022 annual meeting of stockholders to approve, among other things, (i) an amendment to the Company’s amended and restated certificate of incorporation (the “Charter Amendment Proposal”) and (ii) an amendment to the investment management trust agreement, dated February 2, 2021, by and between the Company and Continental Stock Transfer & Trust Company, as trustee (the “Trust Amendment Proposal” and together with the Charter Amendment Proposal, the “Proposals”), which would, if implemented, allow the Company to redeem all of its outstanding Class A common stock (the “Public Shares”) prior to December 30, 2022 in advance of the Company’s contractual expiration date of February 5, 2023 by changing the date by which the Company must consummate a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination from February 5, 2023 to the time and date immediately following the filing of such amendment to the Company’s amended and restated certificate of incorporation with the Secretary of State of the State of Delaware (the “Accelerated Termination Date”).
In connection with the approval of the Charter Amendment Proposal, the holders of Public Shares may elect to redeem all or a portion of their Public Shares in exchange for their pro rata portion of the funds held in the trust account (the “Voluntary Redemption”). The Company expects to complete the Voluntary Redemption on or around the Accelerated Termination Date if stockholders approve the Proposals. If the Proposals are approved, the Company will redeem all remaining Public Shares not redeemed in the Voluntary Redemption not more than ten business days after the Accelerated Termination Date (the “Mandatory Redemption”). The Company expects to complete the Mandatory Redemption on or around December 2, 2022, if stockholders approve the Proposals.
The virtual special meeting will be held on Wednesday, November 30, 2022, at 10:00 a.m. Eastern Time, and the record date for the meeting is the close of business (New York time) on October 31, 2022.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References to the “Company,” “our,” “us” or “we” refer to The Music Acquisition Corporation. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward- looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-Q. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “Annual Report on Form 10-K”) filed with the Securities and Exchange Commission (“SEC”) on March 24, 2022 and our other SEC filings.
Overview
We are a blank check company incorporated in Delaware on October 14, 2020, for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses (the “Business Combination”). We have not selected any specific Business Combination target and we have not, nor has anyone on our behalf, engaged in any substantive discussions directly or indirectly, with any Business Combination target with respect to an initial Business Combination with us. We intend to effectuate our initial Business Combination using cash from the proceeds of the Initial Public Offering and the private placement of the private placement warrants, the proceeds of the sale of our shares in connection with our initial business combination (including pursuant to forward purchase agreements or backstop agreements we may enter into), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing.
The issuance of additional shares in connection with an initial business combination to the owners of the target or other investors:
| ● | may significantly dilute the equity interest of investors, which dilution would increase if the anti-dilution provisions in the Class B common stock resulted in the issuance of Class A common stock on a greater than one-to-one basis upon conversion of the Class B common stock; |
| ● | may subordinate the rights of holders of Class A common stock if shares of preferred stock are issued with rights senior to those afforded our Class A common stock; |
| ● | could cause a change in control if a substantial number of shares of our Class A common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; |
| ● | may have the effect of delaying or preventing a change of control of us by diluting the share ownership or voting rights of a person seeking to obtain control of us; and |
| ● | may adversely affect prevailing market prices for our Class A common stock and/or warrants. |
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Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:
| ● | default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations; |
| ● | acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
| ● | our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand; |
| ● | our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding; |
| ● | our inability to pay dividends on our Class A common stock; |
| ● | using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our Class A common stock if declared, expenses, capital expenditures, acquisitions and other general corporate purposes; |
| ● | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
| ● | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and |
| ● | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt. |
Recent Developments
Special Stockholder Meeting
In October 2022, our board of directors approved, among other things, an amendment to our amended and restated certificate of incorporation (the “Charter Amendment”) and trust agreement, dated February 2, 2021, with Continental Stock Transfer & Trust Company, as trustee (the “Trust Amendment”). Adoption of each of the Charter Amendment and Trust Amendment will require the affirmative vote of at least 65% of our outstanding shares of common stock as of the close of business on October 31, 2022 (the “record date”).
We filed a definitive proxy statement with the SEC on November 3, 2022 to solicit the approval of our stockholders of the following items at a special meeting of stockholders in lieu of the Company’s 2022 annual general meeting of stockholders (the “Special Meeting”), which is to be held on November 30, 2022: (i) the Charter Amendment, to change the date by which the we must consummate our initial Business Combination from February 5, 2023 (the “Original Termination Date”), to the time and date immediately following the filing of such amendment with the Secretary of State of the State of Delaware (the “Accelerated Termination Date”); (ii) the Trust Amendment, to change the date on which the trustee must commence liquidation of the trust account established in connection with our Initial Public Offering to the time and date immediately following the Accelerated Termination Date; (iii) a proposal to ratify the appointment of WithumSmith+Brown, PC as our independent registered public accounting firm for the fiscal year ending December 31, 2022 (the “Auditor Ratification Proposal”); and (iv) a proposal to adjourn the Special Meeting to a later date or dates, if necessary or appropriate, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Special Meeting, there are not sufficient votes to approve the Charter Amendment or Trust Amendment (the “Adjournment Proposal”).
We expect our Sponsor and our directors and officers to vote any common stock owned by them in favor of the Charter Amendment and Trust Amendment. If the Charter Amendment and Trust Amendment are not approved or implemented and we are unable to complete a Business Combination on or before the Original Termination Date, we expect to liquidate and dissolve in accordance with our certificate of incorporation.
Notice of Delisting of Company’s Warrants
On October 24, 2022, the New York Stock Exchange (the “NYSE”) notified us, and publicly announced, that the NYSE determined to commence proceedings to delist the Company’s warrants, each whole warrant exercisable to purchase one share of the Company’s Class A common stock, par value $0.0001 per share, at a price of $11.50 per share, and listed to trade on NYSE under the symbol “TMAC WS” (the “Public Warrants”), from the NYSE and that trading in the Public Warrants would be suspended immediately, due to “abnormally low” trading price levels pursuant to Section 802.01D of the NYSE Listed Company Manual. We filed an 8-K on October 28, 2022 announcing the NYSE’s determination and that we do not intend to appeal such determination.
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Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from October 14, 2020 (inception) through September 30, 2022 were organizational activities and those necessary to prepare for the Initial Public Offering, and, after our Initial Public Offering, identifying a target company for an initial Business Combination. We do not expect to generate any operating revenues until after the completion of our initial Business Combination, at the earliest. We generate non-operating income in the form of interest income on investments held in the Trust Account. We are incurring 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, 2022, we had net income of $1,438,018, which included a gain from the change in fair value of warrant liabilities of $905,000 and interest income of $1,037,125, offset by a loss from operations of $299,402 and provision for income taxes of $204,705.
For the nine months ended September 30, 2022, we had a net income of $9,525,710, which included a gain from the change in fair value of warrant liabilities of $9,412,000 and interest income of $1,370,700, offset by a loss from operations of $1,042,948 and provision for income taxes of $214,042.
For the three months ended September 30, 2021, we had a net income of $1,537,073, which included a gain from the change in fair value of warrant liabilities of $1,810,000 and interest income of $2,960, offset by a loss from operations of $275,887.
For the nine months ended September 30, 2021, we had a net income of 542,718, which included a gain from the change in fair value of warrant liabilities of $1,824,370 and interest income of $13,260, offset by a loss from operations of $738,298, and offering cost expense allocated to warrants of $556,614.
Liquidity and Capital Resources
On February 5, 2021, we consummated the Initial Public Offering of 23,000,000 Units, which includes the full exercise by the underwriters of the over-allotment option to purchase an additional 3,000,000 Units, at $10.00 per Unit, generating gross proceeds of $230.0 million. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 6,600,000 Private Placement Warrants, at $1.00 per Private Placement Warrant, to our Sponsor, generating gross proceeds of $6.6 million.
Transaction costs amounted to $13,101,431, consisting of $4,600,000 of underwriting discount, $8,050,000 of deferred underwriting discount, and $451,431 of other offering costs.
Following the closing of our Initial Public Offering on February 5, 2021, $230,000,000 ($10.00 per Unit) from the proceeds of the sale of the Units in the Initial Public Offering, including the proceeds from the sale of the Private Placement Warrants, was deposited in the Trust Account. The proceeds held in the Trust Account will only be invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions of Rule 2a-7 promulgated under the Investment Company Act which invests only in direct U.S. government treasury obligations, until the earliest of (a) the completion of the initial business combination, (b) the redemption of the our public shares if we are unable to complete the initial business combination within 24 months from the closing of the Initial Public Offering, subject to applicable law, and (c) the redemption of our public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation.
As of September 30, 2022, we had $116,606 in cash and working capital deficit of $509,887 and $1,068,629 of interest income available in the trust account to pay for its tax obligations, if any.
As of September 30, 2022, our liquidity needs have been satisfied through a payment of $25,000 from our sponsor to cover certain expenses on our behalf in exchange for the issuance of the Founder Shares to our sponsor, working capital loans of approximately $380,000 pursuant to the Notes described above and the net proceeds from the consummation of the Private Placement not held in the Trust Account.
The Company has determined that a Business Combination will not take place within the Combination Period, so there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and mandatory liquidation, should an initial business combination not occur, and potential subsequent dissolution raises substantial doubt about our ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after February 5, 2023. The Company expects to complete the Mandatory Redemption on or around December 2, 2022, if stockholders approve the Proposals.
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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 reimburse an affiliate of our Sponsor for office space, secretarial and administrative services provided to members of our management team in an amount not to exceed $15,000 per month. We began incurring these fees on February 2, 2021 and will continue to incur these fees monthly until the earlier of the completion of our initial Business Combination or our liquidation.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires 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 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. Accordingly, actual results could materially differ from those estimates.
We have identified the following critical accounting policies and estimates:
Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuance to ASC 480 and ASC 815.
The Public Warrants and Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjusts the carrying value of the instruments to fair value at each reporting period until they are exercised. The initial fair value of the Public Warrants issued in connection with the IPO and the fair value of the Private Placement Warrants were estimated using the Monte Carlo simulation model and Black Scholes model, respectively. The fair value of the Public Warrants as of September 30, 2022 is based on observable listed prices for such warrants. The fair value of the Private Placement Warrants as of September 30, 2022 was estimated using the Monte Carlo simulation model. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Class A Common Stock Subject to Possible Redemption
All of the shares of Class A common stock sold as part of the Units in the Initial Public Offering contain a redemption feature which allows for the redemption of such public shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the initial Business Combination and in connection with certain amendments to the Company’s second amended and restated certificate of incorporation. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to possible redemption to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of ASC 480. Accordingly, at September 30, 2022 and December 31, 2021, all shares of Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ deficit section of the Company’s condensed balance sheets.
We recognize changes in redemption value immediately as they occur and adjusts the carrying value of the Class A common stock subject to possible redemption to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security. Effective with the closing of the Initial Public Offering, we recognized the accretion from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
21
Net Income Per Common Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260, Earnings Per Share. Net income per share is computed by dividing net income (loss) by the weighted average number of shares outstanding during the period, excluding shares subject to forfeiture. The calculation of diluted income per common share does not consider the effect of the warrants issued since the exercise of the warrants are contingent upon the occurrence of future events. However, the diluted earnings per share calculation includes the shares subject to forfeiture from the first day of the interim period in which the contingency on such shares was resolved. (at least for this one because it resolved this year).
Basic and diluted net income per share for Class A common stock and Class B common stock is calculated by dividing net income by the weighted average number of shares of Class A common stock and shares of Class B common stock outstanding, allocated proportionally to each class of common stock. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
Income Taxes
We account for income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the unaudited condensed financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of September 30, 2022 and December 31, 2021, our deferred tax asset had a full valuation allowance recorded against it.
ASC 740-270-25-2 requires that an annual effective tax rate be determined and such annual effective rate applied to year to date income in interim periods under ASC 740-270-30-5. The Company’s effective tax rate was 12.46% and 0.00% for the three months ended September 30, 2022 and 2021, respectively, while the Company’s effective tax rate was and 2.20% and 0.00% for the nine months ended September 30, 2022 and 2021, respectively. The effective tax rate differs from the statutory tax rate of 21% for the three and nine months ended September 30, 2022 and 2021, due to changes in fair value in warrant liability, and the valuation allowance on the deferred tax assets.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position 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. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
We recognize 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, 2022 and December 31, 2021. We are currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
We have identified the United States as its only “major” tax jurisdiction. We are subject to income taxation by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. Our management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
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Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our financial statements.
Emerging Growth Company Status
We are 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 we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
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. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The net proceeds of the Initial Public Offering, including amounts in the Trust Account, will be invested in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
Item 4. Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
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 of the fiscal quarter ended September 30, 2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2022.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2022, 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.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings
There is no material litigation, arbitration or governmental proceeding currently pending against us or any members of our management team in their capacity as such.
Item 1A. Risk Factors
As of the date of this Quarterly Report on Form 10-Q, there have been no material changes with respect to those risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on March 24, 2022, and our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 filed with the SEC on May 16, 2022.
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases (including redemptions) of stock by publicly traded domestic (i.e., U.S.) corporations and certain domestic subsidiaries of publicly traded foreign corporations. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax. The IR Act applies only to repurchases that occur after December 31, 2022.
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.
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.
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Item 6. Exhibits
| * | Filed herewith. |
| ** | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on this 10th day of November 2022.
| THE MUSIC ACQUISITION CORPORATION | ||
| By: | /s/ Neil Jacobson | |
| Name: | Neil Jacobson | |
| Title: | Chief Executive Officer (Principal Executive Officer) | |
| By: | /s/ Todd Lowen | |
| Name: | Todd Lowen | |
| Title: | Chief Financial Officer and Chief Operating Officer (Principal Financial Officer) | |
26
Exhibit 31.1
CERTIFICATION
PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Neil Jacobson, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 of The Music Acquisition Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) and 15d-15(e)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the periods in which this report is being prepared; |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the periods covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
| Date: November 10, 2022 | By: | /s/ Neil Jacobson |
| Neil Jacobson | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION
PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Todd Lowen, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 of The Music Acquisition Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the periods in which this report is being prepared; |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the periods covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
| Date: November 10, 2022 | By: | /s/ Todd Lowen |
| Todd Lowen Chief Financial Officer (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of The Music Acquisition Corporation (the “Company”) on Form 10-Q for the quarter ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Neil Jacobson, Chief Executive Officer of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
| (1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: November 10, 2022 | /s/ Neil Jacobson | |
| Name: | Neil Jacobson | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of The Music Acquisition Corporation (the “Company”) on Form 10-Q for the quarter ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Todd Lowen, Chief Financial Officer of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
| (1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: November 10, 2022 | /s/ Todd Lowen | |
| Name: | Todd Lowen | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
Condensed Balance Sheets (Parentheticals) - $ / shares |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Common stock subject to possible redemption | 23,000,000 | 23,000,000 |
| Common stock subject to possible redemption, per share (in Dollars per share) | $ 10 | $ 10 |
| Preferred stock par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
| Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
| Preferred stock, shares issued | ||
| Preferred stock, shares outstanding | ||
| Class A Common Stock | ||
| Common stock par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 380,000,000 | 380,000,000 |
| Common stock, shares issued | ||
| Common stock, shares outstanding | ||
| Class B Common Stock | ||
| Common stock par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 20,000,000 | 20,000,000 |
| Common stock, shares issued | 5,750,000 | 5,750,000 |
| Common stock, shares outstanding | 5,750,000 | 5,750,000 |
Unaudited Condensed Statements of Operations - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Formation and operating costs | $ 299,402 | $ 275,887 | $ 1,042,948 | $ 738,298 |
| Loss from Operations | (299,402) | (275,887) | (1,042,948) | (738,298) |
| Other income: | ||||
| Interest earned on cash and investments held in Trust Account | 1,037,125 | 2,960 | 1,370,700 | 13,260 |
| Offering costs allocated to warrants | (556,614) | |||
| Change in fair value of warrant liability | 905,000 | 1,810,000 | 9,412,000 | 1,824,370 |
| Total other income, net | 1,942,125 | 1,812,960 | 10,782,700 | 1,281,016 |
| Income before provision for income taxes | 1,642,723 | 1,537,073 | 9,739,752 | 542,718 |
| Provision for income taxes | (204,705) | (214,042) | ||
| Net income | $ 1,438,018 | $ 1,537,073 | $ 9,525,710 | $ 542,718 |
| Class A Common Stock | ||||
| Other income: | ||||
| Weighted average shares outstanding (in Shares) | 23,000,000 | 23,000,000 | 23,000,000 | 20,051,282 |
| Basic and diluted net income (loss) per share (in Dollars per share) | $ 0.05 | $ 0.05 | $ 0.33 | $ 0.02 |
| Class B Common Stock | ||||
| Other income: | ||||
| Weighted average shares outstanding (in Shares) | 5,750,000 | 5,750,000 | 5,750,000 | 5,653,846 |
| Basic and diluted net income (loss) per share (in Dollars per share) | $ 0.05 | $ 0.05 | $ 0.33 | $ 0.02 |
Unaudited Condensed Statements of Operations (Parentheticals) - $ / shares |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Class A Common Stock | ||||
| Weighted average shares outstanding | 23,000,000 | 23,000,000 | 23,000,000 | 18,425,414 |
| Basic and diluted net income (loss) per share | $ 0.05 | $ 0.05 | $ 0.33 | $ 0.02 |
| Class B Common Stock | ||||
| Weighted average shares outstanding | 5,750,000 | 5,750,000 | 5,750,000 | 5,600,829 |
| Basic and diluted net income (loss) per share | $ 0.05 | $ 0.05 | $ 0.33 | $ 0.02 |
Organization and Business Operations |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Organization and Business Operations | Note 1 — Organization and Business Operations
The Music Acquisition Corporation (the “Company”) is a newly organized blank check company incorporated as a Delaware corporation on October 14, 2020. The Company was formed for the purpose of effecting a merger, stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (“Business Combination”).
As of September 30, 2022, the Company had not commenced any operations. All activity through September 30, 2022 relates to the Company’s formation and the Initial Public Offering (“IPO”) 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 generates non-operating income in the form of interest income from the proceeds derived from the IPO.
The registration statement for the Company’s IPO was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on February 2, 2021 (the “Effective Date”). On February 5, 2021, the Company consummated the IPO of 23,000,000 units (the “Units” and, with respect to the shares of Class A common stock included in the Units sold, the “public shares”), which included the full exercise by the underwriters of the over-allotment option to purchase an additional 3,000,000 Units, at $10.00 per Unit, generating gross proceeds of $230,000,000, which is discussed in Note 3. Each Unit consists of one share of common stock, and one-half of one redeemable warrant to purchase one share of Class A common stock at a price of $11.50 per whole share.
Simultaneously with the closing of the IPO, the Company consummated the sale of 6,600,000 Private Placement Warrants (the “Private Placement Warrants”), at a price of $1.00 per Private Placement Warrant, in a private placement to Music Acquisition Sponsor, LLC, a Delaware limited liability company (the “Sponsor”), generating gross proceeds of $6,600,000, which is discussed in Note 4.
Transaction costs of the IPO amounted to $13,101,431 consisting of $4,600,000 of underwriting discount, $8,050,000 of deferred underwriting discount, and $451,431 of other offering costs.
Following the closing of the IPO on February 5, 2021, $230,000,000 ($10.00 per Unit) from the net offering proceeds of the sale of the Units in the IPO and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”) and invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), having a maturity of 185 days or less or in money market funds meeting certain conditions of Rule 2a-7 promulgated under the Investment Company Act which invests only in direct U.S. government treasury obligations, until the earliest of (a) the completion of the Company’s initial Business Combination, (b) the redemption of the Company’s public shares if the Company is unable to complete the initial Business Combination within 24 months from the closing of the IPO, subject to applicable law, and (c) the redemption of the Company’s public shares properly submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation.
The Company’s Business Combination must be with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (excluding the amount of any deferred underwriting discount held in trust and taxes payable) at the time of the signing a definitive agreement in connection with an initial Business Combination. However, the Company will only complete a Business Combination if the post transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.
The Company will provide its public holders of its outstanding public shares (the “public stockholders”) with the opportunity to redeem all or a portion of their public shares upon the completion of the initial Business Combination either (i) in connection with a stockholder meeting called to approve the initial Business Combination or (ii) without a stockholder vote by means of a tender offer. Except for as required by applicable law or stock exchange listing requirements, the decision as to whether the Company will seek stockholder approval of a proposed Business Combination or conduct a tender offer will be made by the Company, solely in its discretion.
The stockholders will be entitled to redeem their shares for a pro rata share of the aggregate amount then on deposit in the Trust Account calculated as of two business days prior to the consummation of the initial Business Combination, including interest earned on the funds held in the Trust Account (net of amounts which may be withdrawn to pay taxes), divided by the number of then outstanding public shares, subject to the limitations described in the prospectus. The amount in the Trust Account is initially anticipated to be $10.00 per public share. The redemption rights will include the requirement that a beneficial holder must identify itself in order to validly redeem its shares. The per share amount the Company will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters in the IPO.
The Company will have only 24 months from the closing of the IPO to complete an initial Business Combination (the “Combination Period”). However, if the Company does not 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 its taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, liquidate and dissolve, 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 Company’s initial stockholders, officers and directors have agreed to (i) waive their redemption rights with respect to any Founder Shares (as defined below) and public shares they hold in connection with the completion of the initial Business Combination, (ii) waive their redemption rights with respect to any Founder Shares and public shares they hold in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation, (iii) waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares they hold if the Company fails to complete the initial Business Combination within the Combination Period, and (iv) vote any Founder Shares and any public shares held by them in favor of the Company’s initial Business Combination.
The Company’s Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or other similar agreement or Business Combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third-party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). However, the Company has not asked its Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether its Sponsor has sufficient funds to satisfy its indemnity obligations and the Company believes that the Company’s Sponsor’s only assets are securities of the Company. Therefore, the Company cannot assure that its Sponsor would be able to satisfy those obligations.
Liquidity, Capital Resources and Going Concern
The Company’s liquidity needs up to February 5, 2021 had been satisfied through a capital contribution from the Sponsor of $25,000 (see Note 6) for the Founder Shares and the loan under an unsecured promissory note from the Sponsor of $170,000 (see Note 6). The promissory note from the Sponsor was paid in full as of February 8, 2021. In addition, in order to finance transaction costs in connection with a Business Combination, the Company’s Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, provide the Company Working Capital Loans (see Note 5).
On February 25, 2022, (i) Neil Jacobson, the Company’s Chief Executive Officer and a manager of Music Acquisition Sponsor, LLC, the Sponsor, and (ii) Todd Lowen, the Company’s Chief Financial Officer and Chief Operating Officer and a manager of the Sponsor, (each, a “Lender” and collectively, the “Lenders”), each loaned $140,000 for a total of $280,000 to the Company. These borrowings were memorialized by the execution of two unsecured promissory notes (the “Notes”) issued by the Company to the Lenders, under each of which the Company may borrow in the principal amount of up to $250,000, for up to a total of $500,000, of Working Capital Loans. On May 25, 2022, the Company borrowed an additional $100,000 from the Lenders under the Notes. The Notes do not bear interest and the principal balance will be payable on the earliest to occur of (i) the date on which the Company consummates its initial business combination and (ii) the date that the winding up of the Company is effective (such date, the “Maturity Date”). In the event the Company consummates its initial business combination, the respective Lender has the option on the Maturity Date to convert all or any portion of the principal outstanding under the respective Note into that number of warrants (“Working Capital Warrants”) equal to the portion of the principal amount of the Note being converted divided by $1.00, rounded up to the nearest whole number. The terms of the Working Capital Warrants, if any, would be identical to the terms of the Private Placement Warrants.
As of September 30, 2022, the Company had $116,606 in cash, working capital deficit of $509,887 and $1,068,629 of interest income available in the trust account to pay for its tax obligations, if any.
As of September 30, 2022, the Company’s liquidity needs have been satisfied through a payment of $25,000 from the Sponsor to cover certain expenses on its behalf in exchange for the issuance of the Founder Shares to the Sponsor, working capital loans of approximately $380,000 pursuant to the Notes described above and the net proceeds from the consummation of the Private Placement not held in the Trust Account.
As of September 30, 2022 and December 31, 2021, there were $380,000 and no amounts outstanding, respectively, under the Notes as Working Capital Loans.
The Company has determined that a Business Combination will not take place within the Combination Period, so there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and mandatory liquidation, should an initial Business Combination not occur, and potential subsequent dissolution 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 5, 2023. The Company expects to complete the Mandatory Redemption (as defined below) on or around December 2, 2022, if stockholders approve the Proposals (as defined below).
Risks and Uncertainties
Management is continuing to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that it could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy are not determinable as of the date of these unaudited condensed financial statements. The specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these unaudited condensed financial statements.
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases (including redemptions) of stock by publicly traded domestic (i.e., U.S.) corporations and certain domestic subsidiaries of publicly traded foreign corporations. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax. The IR Act applies only to repurchases that occur after December 31, 2022.
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination. |
Significant Accounting Policies |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Significant Accounting Policies | Note 2 — Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements of the Company are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K filed by the Company with the SEC on March 24, 2022. The interim results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future period.
Emerging Growth Company Status
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 auditor 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 unaudited condensed financial statements in conformity with GAAP requires 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 unaudited condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates.
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 unaudited condensed 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 unaudited condensed financial statements is the determination of the fair value of the warrant liability. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. As of September 30, 2022 and December 31, 2021, the Company had $116,606 and $371,025 in cash held in its operating account, respectively, and did not have any cash equivalents.
Investments Held in Trust Account
At September 30, 2022 and December 31, 2021, the assets held in the Trust Account were held in money market funds which invest in U.S. Treasury securities, and are presented at fair value based upon the quoted market price (see Note 8). During the nine months ended September 30, 2022 and 2021, the Company withdrew $320,190 and $0 of the interest income from the Trust Account to pay its tax obligations, respectively.
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 coverage limit of $250,000 as of September 30, 2022 and December 31, 2021. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to FASB ASC Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”).
The Public Warrants and Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the carrying value of the instruments to fair value at each reporting period until they are exercised. The initial fair value of the Public Warrants issued in connection with the IPO and the fair value of the Private Placement Warrants were estimated using the Monte Carlo simulation model and Black Scholes model, respectively. The fair value of the Public Warrants as of September 30, 2022 is based on observable listed prices for such warrants. The fair value of the Private Placement Warrants as of September 30, 2022 and December 31, 2021 was estimated using the Monte Carlo simulation model. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Offering Costs Associated with the Initial Public Offering
The Company complies with the requirements of ASC 340-10-S99-1. Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the IPO that were directly related to the IPO. Offering costs are allocated to the separable financial instruments issued in the IPO based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities are expensed as incurred, presented as non-operating expenses in the unaudited condensed statements of operations. Offering costs associated with the Class A common stock were charged to temporary equity upon the completion of the IPO. The Company classifies deferring underwriting commissions as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Class A Common Stock Subject to Possible Redemption
All the shares of Class A common stock sold as part of the Units in the IPO contain a redemption feature which allows for the redemption of such public shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the initial Business Combination and in connection with certain amendments to the Company’s amended and restated certificate of incorporation. In accordance with the SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to possible redemption to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all the entity’s equity instruments, are excluded from the provisions of ASC 480. Accordingly, at September 30, 2022 and December 31, 2021, all shares of Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ deficit section of the Company’s condensed balance sheets, respectively.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the Class A common stock subject to possible redemption to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security. Effective with the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
The Class A common stock subject to possible redemption reflected on the condensed balance sheets as of September 30, 2022 and December 31, 2021 is reconciled in the following table:
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the unaudited condensed financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of September 30, 2022 and December 31, 2021, the Company’s deferred tax asset had a full valuation allowance recorded against it.
ASC 740-270-25-2 requires that an annual effective tax rate be determined and such annual effective rate applied to year to date income in interim periods under ASC 740-270-30-5. The Company’s effective tax rate was 12.46% and 0.00% for the three months ended September 30, 2022 and 2021, respectively, while the Company’s effective tax rate was and 2.20% and 0.00% for the nine months ended September 30, 2022 and 2021, respectively. The effective tax rate differs from the statutory tax rate of 21% for the three and nine months ended September 30, 2022 and 2021, due to changes in fair value in warrant liability, and the valuation allowance on the deferred tax assets.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position 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. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
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, 2022 and December 31, 2021. 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 has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Net Income Per Common Stock
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding during the period, excluding stocks subject to forfeiture. The calculation of diluted income (loss) per common share does not consider the effect of the warrants issued since the exercise of the warrants are contingent upon the occurrence of future events. However, the diluted earnings (loss) per share calculation includes the shares subject to forfeiture from the first day of the interim period in which the contingency on such shares was resolved (at least for this one because it resolved this year).
Basic and diluted net income (loss) per share for Class A common stock and Class B common stock is calculated by dividing net income (loss) attributable to the Company by the weighted average number of shares of Class A common stock and shares of Class B common stock outstanding, allocated proportionally to each class of common stock. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
Reconciliation of Net Income per Common Stock
Basic and diluted income per share for Class A common stock and for Class B common stock is calculated as follows:
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature except for warrant liabilities (see Note 8).
The Company follows the guidance in ASC 820, “Fair Value Measurement,” 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:
See Note 8 for additional information on assets and liabilities measured at fair value.
Convertible Promissory Note
The Company accounts for the Notes under ASC 815. Under 815-15-25, the election can be at the inception of a financial instrument to account for the instrument under the fair value option under ASC 825. The Company has made such election for the Notes. Using the fair value option, each Notes is required to be recorded at its initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the Notes are recognized as a non-cash gain or loss on the unaudited condensed statements of operations (see Note 5).
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements. |
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Initial Public Offering |
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| Initial Public Offering Disclosure Abstract | ||||||||||||||||||||||
| Initial Public Offering | Note 3 — Initial Public Offering
Public Units
On February 5, 2021, the Company sold 23,000,000 Units, at a purchase price of $10.00 per Unit, which included the full exercise by the underwriters of the over-allotment option to purchase an additional 3,000,000 Units. Each Unit consists of one share of Class A common stock, and one-half of one redeemable warrant to purchase one share of Class A common stock (the “Public Warrants”).
Public Warrants
Each whole warrant entitles the holder to purchase one share of the Company’s Class A common stock at a price of $11.50 per share, subject to adjustment as discussed herein. The warrants will become exercisable on the later of 12 months from the closing of the IPO or 30 days after the completion of its initial Business Combination and will expire five years after the completion of the Company’s initial Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation. In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A 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 Company’s initial stockholders or their affiliates, without taking into account any Founder Shares held by the Company’s initial stockholders or their affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s Class A common stock during the 20 trading day period starting on the trading day after the day on which the Company consummates the initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described below under “Redemption of warrants” will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, or valid exemption from registration is available. No warrant will be exercisable, and the Company will not be obligated to issue a share of Class A common stock upon exercise of a warrant unless the share of Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In no event will the Company be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a Unit containing such warrant will have paid the full purchase price for the Unit solely for the share of Class A common stock underlying such Unit.
The Company has agreed that as soon as practicable, but in no event later than fifteen (15) business days after the closing of the initial Business Combination, it will use its reasonable best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A common stock issuable upon exercise of the warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the sixtieth (60th) business day after the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, it will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Once the warrants become exercisable, the Company may call the Public Warrants for redemption:
If the Company calls the warrants for redemption as described above, the Company will have the option to require any holder that wishes to exercise his, her or its warrant to do so on a “cashless basis.” If the Company takes advantage of this option, all holders of warrants would pay the exercise price by surrendering their warrants in exchange for a number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of (A) the number of shares of Class A common stock underlying the warrants and (B) the excess of the “fair market value” of the Company’s Class A common stock (defined in the next sentence) over the exercise price of the warrants by (y) the fair market value. The “fair market value” will mean the average last reported sales price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. |
Private Placement |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Private Placement Abstract | |
| Private Placement | Note 4 — Private Placement
Simultaneously with the closing of the IPO, the Sponsor purchased an aggregate of 6,600,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, for an aggregate purchase price of $6,600,000, in a private placement. A portion of the proceeds from the private placement was added to the proceeds from the IPO held in the Trust Account.
The Private Placement Warrants are identical to the Public Warrants sold in the IPO except that the Private Placement Warrants, so long as they are held by the initial stockholders or its permitted transferees, (i) they will not be redeemable by the Company for cash, (ii) they (including the Class A common stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold until 30 days after the completion of the Company’s initial Business Combination, and (iii) they may be exercised by the holders on a cashless basis. If the Private Placement Warrants are held by holders other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the warrants included in the Units sold in the IPO. |
Related Party Transactions |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions | Note 5 — Related Party Transactions
Founder Shares
On November 25, 2020, the Sponsor paid $25,000 in cash, or approximately $0.004 per share, to the Company in consideration for 5,750,000 shares of Class B common stock (the “Founder Shares”). The Founder Shares included an aggregate of up to 750,000 shares which were subject to forfeiture if the over-allotment option was not exercised by the underwriters in full. On February 5, 2021, the underwriters fully exercised their over-allotment option, hence, the 750,000 Founder Shares are no longer subject to forfeiture.
The Sponsor has agreed not to transfer, assign or sell any of its Founder Shares (subject to certain limited exceptions) until the earlier to occur of (i) one year after the completion of the Company’s initial Business Combination or (ii) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction after the initial Business Combination that results in all of the Company’s stockholders having the right to exchange their Class A common stock for cash, securities or other property (the “Lock-up”). Notwithstanding the foregoing, if (A) the last reported sales price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination or (B) the Company consummates a transaction after the initial Business Combination which results in its stockholders having the right to exchange their shares for cash, securities or other property, the Founder Shares will be released from the Lock-up.
Promissory Note — Related Party
On November 25, 2020, the Company issued an unsecured promissory note to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount of $300,000 to be used for a portion of the expenses of the IPO. This loan was non-interest bearing, unsecured and due at the earlier of March 31, 2022 or the closing of the IPO. As of the IPO on February 5, 2021, the Company had drawn down $170,000 under the promissory note. On February 8, 2021, the Company paid the $170,000 balance on the note in full. The Company is unable to borrow any future amounts against this note.
Related Party Working Capital Loans
In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors or their respective affiliates may, but are not obligated to, loan the Company funds as may be required on a non-interest basis (“Working Capital Loans”). If the Company completes a Business Combination, the Company will repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside of the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period.
On February 25, 2022, (i) Neil Jacobson, the Company’s Chief Executive Officer and a manager of Music Acquisition Sponsor, LLC, the Sponsor, and (ii) Todd Lowen, the Company’s Chief Financial Officer and Chief Operating Officer and a manager of the Sponsor, (each, a “Lender” and collectively, the “Lenders”), each loaned $140,000 for a total of $280,000 to the Company. These borrowings were memorialized by the execution of two unsecured promissory notes (the “Notes”) issued by the Company to the Lenders, under each of which the Company may borrow in the principal amount of up to $250,000, for up to a total of $500,000, of Working Capital Loans. On May 25, 2022, the Company borrowed an additional $100,000 from the Lenders under the Notes. The Notes do not bear interest and the principal balance will be payable on the earliest to occur of (i) the date on which the Company consummates its initial business combination and (ii) the date that the winding up of the Company is effective (such date, the “Maturity Date”). In the event the Company consummates its initial business combination, the respective Lender has the option on the Maturity Date to convert all or any portion of the principal outstanding under the respective Note into that number of Working Capital Warrants equal to the portion of the principal amount of the Note being converted divided by $1.00, rounded up to the nearest whole number. The terms of the Working Capital Warrants, if any, would be identical to the terms of the Private Placement Warrants. The Notes were valued using the fair value method. Changes in the estimated fair value of the notes are recognized quarterly as a non-cash gain or loss on the unaudited condensed statements of operations. The fair value of the note as of September 30, 2022 and December 31, 2021 was $380,000 and $0, respectively, which resulted in no change in fair value of the Notes for the nine months ended September 30, 2022.
Administrative Service Fee
The Company agreed to pay an affiliate of the Company’s Sponsor a monthly fee of $15,000 for office space, secretarial and administrative services. Upon completion of the Company’s Business Combination or its liquidation, the Company will cease paying these monthly fees. For the three and nine months ended September 30, 2022, the Company has incurred and paid administrative service fees of $45,000 and $135,000, respectively.
For the three months and nine months ended September 30, 2021, the Company has incurred and paid administrative service fees of $45,000 and $120,000, respectively. |
Commitments and Contingencies |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies | Note 6 — Commitments and Contingencies
Registration and Stockholder Rights
The holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans will be entitled to registration rights pursuant to a registration rights agreement dated as of February 2, 2021 by and between the Company and the parties thereto, requiring the Company to register such securities and any other securities of the Company acquired by them prior to the consummation of the initial Business Combination for resale. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, the holders have certain “piggy-back” registration rights to include their securities in other registration statements filed by the Company.
Underwriting Agreement
The underwriters had a 45-day option from the date of the IPO to purchase up to an aggregate of 3,000,000 additional Units at the public offering price less the underwriting commissions to cover over-allotments, if any. On February 5, 2021, the underwriters fully exercised their over-allotment option and were paid a cash underwriting discount of $0.20 per Unit, or $4,600,000 in the aggregate.
The underwriters are entitled to deferred underwriting fees of 3.5% of the gross proceeds of the IPO, or $8,050,000 in the aggregate. The deferred fee will be payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes an initial Business Combination, subject to the terms of the underwriting agreement. |
Stockholders’ Deficit |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Stockholders' Equity Note [Abstract] | |
| Stockholders’ Deficit | Note 7 — Stockholders’ Deficit
Preferred Stock — The Company is authorized to issue a total of 1,000,000 preferred shares at par value of $0.0001 each. At September 30, 2022 and December 31, 2021, there were no shares of preferred stock issued and outstanding.
Class A Common Stock — The Company is authorized to issue a total of 380,000,000 shares of Class A common stock at par value of $0.0001 each. At September 30, 2022 and December 31, 2021, there were no shares issued and outstanding, excluding 23,000,000 shares of Class A common stock that are subject to possible redemption.
Class B Common Stock — The Company is authorized to issue a total of 20,000,000 shares of Class B common stock at par value of $0.0001 each. At September 30, 2022 and December 31, 2021, there were 5,750,000 shares issued and outstanding.
The shares of Class B common stock will automatically convert into shares of the Company’s Class A common stock at the time of the closing of its initial Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment as provided herein. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in connection with the initial Business Combination, the number of shares of Class A common stock issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis, 20% of the total number of shares of Class A common stock outstanding after such conversion (after giving effect to any redemptions of shares of Class A common stock by public stockholders), including the total number of shares of Class A common stock issued, or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of the initial Business Combination, excluding any shares of Class A common stock or equity-linked securities or rights exercisable for or convertible into shares of Class A common stock issued, or to be issued, to any seller in the initial Business Combination and any Private Placement Warrants issued to the Sponsor, officers or directors upon conversion of Working Capital Loans, provided that such conversion of Founder Shares will never occur on a less than one-for-one basis.
Stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders. Holders of the Class A common stock and holders of the Class B common stock will vote together as a single class on all matters submitted to a vote of the Company’s stockholders except as required by law. Unless specified in the Company’s amended and restated certificate of incorporation, or as required by applicable provisions of the Delaware General Corporation Law or applicable stock exchange rules, the affirmative vote of a majority of the Company’s shares of common stock that are voted is required to approve any such matter voted on by the Company’s stockholders. |
Fair Value Measurements |
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| Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurements | Note 8 — Fair Value Measurements
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
The fair value of the working capital loans evidenced by the Notes is based on recent transactions and as a result, there were no unobservable inputs that have been internally developed by the Company which need to be disclosed. There have been no changes in fair value for the period.
The Warrants are 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 unaudited condensed statements of operations.
The Company established the initial fair value of the Public Warrants and Private Placement Warrants on February 5, 2021, the date of the Company’s IPO, using a Monte Carlo simulation model and Black Scholes model, respectively. The Public Warrants and Private Placement Warrants were classified as Level 3 at the initial measurement date. As of September 30, 2022 and 2021, the Public Warrants were classified as Level 1 due to use of the observed trading price of the separated Public Warrants, and the Private Placement Warrants were classified as Level 3 due to the use of unobservable inputs.
The following table presents the changes in the fair value of Level 3 warrant liabilities for the nine months ended September 30, 2022 and 2021:
Level 3 inputs have inherent uncertainties that are involved. If factors or assumptions change, the estimated fair values could be materially different. The key inputs into the Black-Scholes simulation as of September 30, 2022 and December 31, 2021 were as follows:
Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period. The estimated fair value of the Public Warrants of $7,015,000 transferred from a Level 3 fair value measurement to a Level 1 fair value measurement as of September 30, 2021. The Public Warrants were transferred from Level 1 fair value measurement to Level 2 measurement during the nine months ended September 30, 2022. |
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Subsequent Events |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | Note 9 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.
On November 3, 2022, The Music Acquisition Corporation (the “Company”) filed a definitive proxy statement relating to a special meeting of stockholders in lieu of the 2022 annual meeting of stockholders to approve, among other things, (i) an amendment to the Company’s amended and restated certificate of incorporation (the “Charter Amendment Proposal”) and (ii) an amendment to the investment management trust agreement, dated February 2, 2021, by and between the Company and Continental Stock Transfer & Trust Company, as trustee (the “Trust Amendment Proposal” and together with the Charter Amendment Proposal, the “Proposals”), which would, if implemented, allow the Company to redeem all of its outstanding Class A common stock (the “Public Shares”) prior to December 30, 2022 in advance of the Company’s contractual expiration date of February 5, 2023 by changing the date by which the Company must consummate a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination from February 5, 2023 to the time and date immediately following the filing of such amendment to the Company’s amended and restated certificate of incorporation with the Secretary of State of the State of Delaware (the “Accelerated Termination Date”).
In connection with the approval of the Charter Amendment Proposal, the holders of Public Shares may elect to redeem all or a portion of their Public Shares in exchange for their pro rata portion of the funds held in the trust account (the “Voluntary Redemption”). The Company expects to complete the Voluntary Redemption on or around the Accelerated Termination Date if stockholders approve the Proposals. If the Proposals are approved, the Company will redeem all remaining Public Shares not redeemed in the Voluntary Redemption not more than ten business days after the Accelerated Termination Date (the “Mandatory Redemption”). The Company expects to complete the Mandatory Redemption on or around December 2, 2022, if stockholders approve the Proposals.
The virtual special meeting will be held on Wednesday, November 30, 2022, at 10:00 a.m. Eastern Time, and the record date for the meeting is the close of business (New York time) on October 31, 2022. |
Accounting Policies, by Policy (Policies) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | Basis of Presentation
The accompanying unaudited condensed financial statements of the Company are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K filed by the Company with the SEC on March 24, 2022. The interim results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future period.
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| Emerging Growth Company Status | Emerging Growth Company Status
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 auditor 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.
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| Use of Estimates | Use of Estimates
The preparation of unaudited condensed financial statements in conformity with GAAP requires 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 unaudited condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates.
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 unaudited condensed 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 unaudited condensed financial statements is the determination of the fair value of the warrant liability. Accordingly, the actual results could differ significantly from those estimates.
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| Cash and Cash Equivalents | 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. As of September 30, 2022 and December 31, 2021, the Company had $116,606 and $371,025 in cash held in its operating account, respectively, and did not have any cash equivalents.
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| Investments Held in Trust Account | Investments Held in Trust Account
At September 30, 2022 and December 31, 2021, the assets held in the Trust Account were held in money market funds which invest in U.S. Treasury securities, and are presented at fair value based upon the quoted market price (see Note 8). During the nine months ended September 30, 2022 and 2021, the Company withdrew $320,190 and $0 of the interest income from the Trust Account to pay its tax obligations, respectively.
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| Concentration of Credit Risk | 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 coverage limit of $250,000 as of September 30, 2022 and December 31, 2021. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts |
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| Warrant Liabilities | Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to FASB ASC Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”).
The Public Warrants and Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the carrying value of the instruments to fair value at each reporting period until they are exercised. The initial fair value of the Public Warrants issued in connection with the IPO and the fair value of the Private Placement Warrants were estimated using the Monte Carlo simulation model and Black Scholes model, respectively. The fair value of the Public Warrants as of September 30, 2022 is based on observable listed prices for such warrants. The fair value of the Private Placement Warrants as of September 30, 2022 and December 31, 2021 was estimated using the Monte Carlo simulation model. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
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| Offering Costs Associated with the Initial Public Offering | Offering Costs Associated with the Initial Public Offering
The Company complies with the requirements of ASC 340-10-S99-1. Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the IPO that were directly related to the IPO. Offering costs are allocated to the separable financial instruments issued in the IPO based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities are expensed as incurred, presented as non-operating expenses in the unaudited condensed statements of operations. Offering costs associated with the Class A common stock were charged to temporary equity upon the completion of the IPO. The Company classifies deferring underwriting commissions as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
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| Class A Common Stock Subject to Possible Redemption | Class A Common Stock Subject to Possible Redemption
All the shares of Class A common stock sold as part of the Units in the IPO contain a redemption feature which allows for the redemption of such public shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the initial Business Combination and in connection with certain amendments to the Company’s amended and restated certificate of incorporation. In accordance with the SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to possible redemption to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all the entity’s equity instruments, are excluded from the provisions of ASC 480. Accordingly, at September 30, 2022 and December 31, 2021, all shares of Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ deficit section of the Company’s condensed balance sheets, respectively.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the Class A common stock subject to possible redemption to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security. Effective with the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
The Class A common stock subject to possible redemption reflected on the condensed balance sheets as of September 30, 2022 and December 31, 2021 is reconciled in the following table:
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| Income Taxes | Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the unaudited condensed financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of September 30, 2022 and December 31, 2021, the Company’s deferred tax asset had a full valuation allowance recorded against it.
ASC 740-270-25-2 requires that an annual effective tax rate be determined and such annual effective rate applied to year to date income in interim periods under ASC 740-270-30-5. The Company’s effective tax rate was 12.46% and 0.00% for the three months ended September 30, 2022 and 2021, respectively, while the Company’s effective tax rate was and 2.20% and 0.00% for the nine months ended September 30, 2022 and 2021, respectively. The effective tax rate differs from the statutory tax rate of 21% for the three and nine months ended September 30, 2022 and 2021, due to changes in fair value in warrant liability, and the valuation allowance on the deferred tax assets.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position 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. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
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, 2022 and December 31, 2021. 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 has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
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| Net Income Per Common Stock | Net Income Per Common Stock
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding during the period, excluding stocks subject to forfeiture. The calculation of diluted income (loss) per common share does not consider the effect of the warrants issued since the exercise of the warrants are contingent upon the occurrence of future events. However, the diluted earnings (loss) per share calculation includes the shares subject to forfeiture from the first day of the interim period in which the contingency on such shares was resolved (at least for this one because it resolved this year).
Basic and diluted net income (loss) per share for Class A common stock and Class B common stock is calculated by dividing net income (loss) attributable to the Company by the weighted average number of shares of Class A common stock and shares of Class B common stock outstanding, allocated proportionally to each class of common stock. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
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| Reconciliation of Net Income per Common Stock | Reconciliation of Net Income per Common Stock
Basic and diluted income per share for Class A common stock and for Class B common stock is calculated as follows:
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| Fair Value of Financial Instruments | Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature except for warrant liabilities (see Note 8).
The Company follows the guidance in ASC 820, “Fair Value Measurement,” 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:
See Note 8 for additional information on assets and liabilities measured at fair value.
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| Convertible Promissory Note | Convertible Promissory Note
The Company accounts for the Notes under ASC 815. Under 815-15-25, the election can be at the inception of a financial instrument to account for the instrument under the fair value option under ASC 825. The Company has made such election for the Notes. Using the fair value option, each Notes is required to be recorded at its initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the Notes are recognized as a non-cash gain or loss on the unaudited condensed statements of operations (see Note 5).
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements. |
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Significant Accounting Policies (Tables) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of class A common stock subject to possible redemption reflected on the balance sheet |
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| Schedule of company’s basic and diluted income (loss) per common share |
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Fair Value Measurements (Tables) |
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| Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of assets and liabilities measured at fair value on recurring basis |
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| Schedule of the changes in fair value of Level 3 warrant liabilities |
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| Schedule of change in fair value of warrant liabilities |
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| Schedule of inputs into Monte Carlo simulation |
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Organization and Business Operations (Details) - USD ($) |
9 Months Ended | ||||
|---|---|---|---|---|---|
Feb. 05, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Feb. 25, 2022 |
Dec. 31, 2021 |
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| Organization and Business Operations (Details) [Line Items] | |||||
| Number of units issued in transaction (in Shares) | 23,000,000 | ||||
| Unit price per share (in Dollars per share) | $ 10 | ||||
| Gross proceeds | $ 230,000,000 | ||||
| Description of warrant | Each Unit consists of one share of common stock, and one-half of one redeemable warrant to purchase one share of Class A common stock at a price of $11.50 per whole share. | ||||
| Minimum percentage of trust account required for business combination | 80.00% | ||||
| Percentage of voting interest | 50.00% | ||||
| Public share price per share (in Dollars per share) | $ 10 | ||||
| Dissolution expenses | $ 100,000 | ||||
| Business combination agreement, description | The Company’s Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or other similar agreement or Business Combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third-party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). | ||||
| Capital contribution | $ 25,000 | ||||
| Unsecured promissory note | $ 170,000 | ||||
| Sponsor loan | $ 140,000 | ||||
| Borrowed capital | $ 250,000 | ||||
| Borrowed capital total value | 500,000 | ||||
| Additional borrowed capital | 100,000 | ||||
| Cash | 116,606 | ||||
| Working capital | 509,887 | ||||
| Interest income available in trust account | 1,370,700 | $ 13,260 | |||
| Working capital loan | 1,500,000 | ||||
| Working capital loans | $ 380,000 | $ 380,000 | |||
| Income tax rate, description | e., U.S.) corporations and certain domestic subsidiaries of publicly traded foreign corporations. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. | ||||
| Over-Allotment Option [Member] | |||||
| Organization and Business Operations (Details) [Line Items] | |||||
| Number of units issued in transaction (in Shares) | 3,000,000 | ||||
| Additional units (in Shares) | 3,000,000 | ||||
| Unit price per share (in Dollars per share) | $ 10 | ||||
| Gross proceeds | $ 4,600,000 | ||||
| Private Placement Warrants [Member] | |||||
| Organization and Business Operations (Details) [Line Items] | |||||
| Number of units issued in transaction (in Shares) | 6,600,000 | ||||
| Unit price per share (in Dollars per share) | $ 1 | ||||
| Gross proceeds | $ 6,600,000 | ||||
| IPO [Member] | |||||
| Organization and Business Operations (Details) [Line Items] | |||||
| Number of units issued in transaction (in Shares) | 3,000,000 | ||||
| Unit price per share (in Dollars per share) | $ 10 | ||||
| Transaction costs | $ 13,101,431 | ||||
| Underwriting discount | 4,600,000 | ||||
| Deferred underwriting discount | 8,050,000 | ||||
| Other offering costs | 451,431 | ||||
| Net proceeds | $ 230,000,000 | ||||
| Sponsor [Member] | |||||
| Organization and Business Operations (Details) [Line Items] | |||||
| Payment from sponsor | 25,000 | ||||
| Working capital loan | 380,000 | ||||
| Tax obligations [Member] | |||||
| Organization and Business Operations (Details) [Line Items] | |||||
| Interest income available in trust account | $ 1,068,629 | ||||
Significant Accounting Policies (Details) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Dec. 31, 2021 |
|
| Accounting Policies [Abstract] | |||||
| Operating account (in Dollars) | $ 116,606 | $ 371,025 | |||
| Interest income from Trust Account (in Dollars) | 320,190 | $ 0 | |||
| Federal depository insurance coverage (in Dollars) | $ 250,000 | ||||
| Effective tax rate | 12.46% | 0.00% | 2.20% | 0.00% | |
| Statutory tax rate | 21.00% | 21.00% | |||
Significant Accounting Policies (Details) - Schedule of class A common stock subject to possible redemption reflected on the balance sheet - USD ($) |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2022 |
Dec. 31, 2021 |
|
| Schedule Of Class ACommon Stock Subject To Possible Redemption Reflected On The Balance Sheet Abstract | ||
| Gross Proceeds | $ 230,000,000 | |
| Less: | ||
| Proceeds allocated to Public Warrants | (9,771,550) | |
| Class A common stock issuance costs | (12,544,817) | |
| Plus: | ||
| Accretion of carrying value to redemption value | $ 824,587 | 22,316,367 |
| Class A common stock subject to possible redemption | $ 230,824,587 | $ 230,000,000 |
Significant Accounting Policies (Details) - Schedule of company’s basic and diluted income (loss) per common share - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Class A Common Stock [Member] | ||||
| Net Income per share for Class A common stock: | ||||
| Allocation of net income (loss) | $ 1,150,414 | $ 1,229,658 | $ 7,620,568 | $ 423,347 |
| Weighted Average Shares | 23,000,000 | 23,000,000 | 23,000,000 | 20,051,282 |
| Basic and diluted net income per share | $ 0.05 | $ 0.05 | $ 0.33 | $ 0.02 |
| Class B Common Stock [Member] | ||||
| Net Income per share for Class A common stock: | ||||
| Allocation of net income (loss) | $ 287,604 | $ 307,415 | $ 1,905,142 | $ 119,371 |
| Weighted Average Shares | 5,750,000 | 5,750,000 | 5,750,000 | 5,653,846 |
| Basic and diluted net income per share | $ 0.05 | $ 0.05 | $ 0.33 | $ 0.02 |
Initial Public Offering (Details) - $ / shares |
9 Months Ended | |
|---|---|---|
Feb. 05, 2021 |
Sep. 30, 2022 |
|
| Initial Public Offering (Details) [Line Items] | ||
| Sale of shares (in Shares) | 23,000,000 | |
| Price per share | $ 10 | |
| Public warrants, description | Each whole warrant entitles the holder to purchase one share of the Company’s Class A common stock at a price of $11.50 per share, subject to adjustment as discussed herein. The warrants will become exercisable on the later of 12 months from the closing of the IPO or 30 days after the completion of its initial Business Combination and will expire five years after the completion of the Company’s initial Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation. In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A 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 Company’s initial stockholders or their affiliates, without taking into account any Founder Shares held by the Company’s initial stockholders or their affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s Class A common stock during the 20 trading day period starting on the trading day after the day on which the Company consummates the initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described below under “Redemption of warrants” will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price. | |
| Warrant price per share | $ 0.01 | |
| Over-Allotment Option [Member] | ||
| Initial Public Offering (Details) [Line Items] | ||
| Sale of shares (in Shares) | 3,000,000 | |
| Price per share | $ 10 | |
| Class A Common Stock [Member] | ||
| Initial Public Offering (Details) [Line Items] | ||
| Price per share | $ 18 |
Private Placement (Details) - Private Warrants [Member] |
9 Months Ended |
|---|---|
|
Sep. 30, 2022
USD ($)
$ / shares
shares
| |
| Private Placement (Details) [Line Items] | |
| Number of units issued in transaction | shares | 6,600,000 |
| Unit price per share | $ / shares | $ 1 |
| Purchase price | $ | $ 6,600,000 |
Related Party Transactions (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||
|---|---|---|---|---|---|---|---|---|---|
Feb. 25, 2022 |
Nov. 25, 2020 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Dec. 31, 2021 |
Feb. 08, 2021 |
Feb. 05, 2021 |
|
| Related Party Transactions (Details) [Line Items] | |||||||||
| Principal amount | $ 300,000 | ||||||||
| Working capital loan | $ 1,500,000 | ||||||||
| Price per warrant (in Dollars per share) | $ 1 | $ 1 | |||||||
| Promissory note, description | On May 25, 2022, the Company borrowed an additional $100,000 from the Lenders under the Notes. The Notes do not bear interest and the principal balance will be payable on the earliest to occur of (i) the date on which the Company consummates its initial business combination and (ii) the date that the winding up of the Company is effective (such date, the “Maturity Date”). In the event the Company consummates its initial business combination, the respective Lender has the option on the Maturity Date to convert all or any portion of the principal outstanding under the respective Note into that number of Working Capital Warrants equal to the portion of the principal amount of the Note being converted divided by $1.00, rounded up to the nearest whole number. | ||||||||
| Change in fair value of notes | $ 380,000 | $ 0 | |||||||
| Secretarial and administrative services | 15,000 | ||||||||
| Administrative service fee | $ 45,000 | $ 45,000 | $ 135,000 | $ 120,000 | |||||
| Sponsor [Member] | |||||||||
| Related Party Transactions (Details) [Line Items] | |||||||||
| Sponsor paid in cash | $ 25,000 | ||||||||
| Price per share (in Dollars per share) | $ 0.004 | ||||||||
| Consideration shares (in Shares) | 5,750,000 | ||||||||
| Shares of common stock subject to forfeiture (in Shares) | 750,000 | ||||||||
| Over-allotment Option [Member] | |||||||||
| Related Party Transactions (Details) [Line Items] | |||||||||
| Shares of common stock subject to forfeiture (in Shares) | 750,000 | ||||||||
| IPO [Member] | |||||||||
| Related Party Transactions (Details) [Line Items] | |||||||||
| Promissory notes | $ 170,000 | ||||||||
| Total note payable | $ 170,000 | ||||||||
| Sponsor [Member] | |||||||||
| Related Party Transactions (Details) [Line Items] | |||||||||
| Business combination, description | The Sponsor has agreed not to transfer, assign or sell any of its Founder Shares (subject to certain limited exceptions) until the earlier to occur of (i) one year after the completion of the Company’s initial Business Combination or (ii) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction after the initial Business Combination that results in all of the Company’s stockholders having the right to exchange their Class A common stock for cash, securities or other property (the “Lock-up”). Notwithstanding the foregoing, if (A) the last reported sales price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination or (B) the Company consummates a transaction after the initial Business Combination which results in its stockholders having the right to exchange their shares for cash, securities or other property, the Founder Shares will be released from the Lock-up. | ||||||||
Commitments and Contingencies (Details) - USD ($) |
9 Months Ended | 12 Months Ended | |
|---|---|---|---|
Feb. 05, 2021 |
Sep. 30, 2022 |
Dec. 31, 2021 |
|
| Commitments and Contingencies (Details) [Line Items] | |||
| Purchase aggregate shares (in Shares) | 23,000,000 | ||
| Sale of Stock, Consideration Received on Transaction | $ 230,000,000 | ||
| Deferred underwriting fee percentage | 3.50% | ||
| Gross proceeds | $ 230,000,000 | ||
| IPO [Member] | |||
| Commitments and Contingencies (Details) [Line Items] | |||
| Purchase aggregate shares (in Shares) | 3,000,000 | ||
| Gross proceeds | $ 8,050,000 | ||
| Over-Allotment Option [Member] | |||
| Commitments and Contingencies (Details) [Line Items] | |||
| Purchase aggregate shares (in Shares) | 3,000,000 | ||
| Underwriting discount per unit (in Dollars per share) | $ 0.2 | ||
| Sale of Stock, Consideration Received on Transaction | $ 4,600,000 |
Stockholders’ Deficit (Details) - $ / shares |
9 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Dec. 31, 2021 |
|
| Stockholders’ Deficit (Details) [Line Items] | ||
| Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
| Preferred shares, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
| Subject to possible redemption | 23,000,000 | 23,000,000 |
| Converted basis percentage | 20.00% | |
| Class A Common Stock [Member] | ||
| Stockholders’ Deficit (Details) [Line Items] | ||
| Common stock, shares authorized | 380,000,000 | 380,000,000 |
| Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
| Common stock, shares issued | ||
| Class B Common Stock [Member] | ||
| Stockholders’ Deficit (Details) [Line Items] | ||
| Common stock, shares authorized | 20,000,000 | 20,000,000 |
| Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
| Common stock, shares issued | 5,750,000 | 5,750,000 |
Fair Value Measurements (Details) |
Sep. 30, 2022
USD ($)
|
|---|---|
| Public Warrant [Member] | |
| Fair Value Measurements (Details) [Line Items] | |
| Public warrants | $ 7,015,000 |
Fair Value Measurements (Details) - Schedule of the changes in fair value of Level 3 warrant liabilities - Level 3 Warrant Liabilities [Member] - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Sep. 30, 2022 |
Jun. 30, 2022 |
Mar. 31, 2022 |
|
| Fair Value Measurements (Details) - Schedule of the changes in fair value of Level 3 warrant liabilities [Line Items] | |||
| Fair value beginning balance | $ 594,000 | $ 1,455,300 | $ 3,696,000 |
| Change in valuation | (330,000) | (861,300) | (2,240,700) |
| Fair value ending balance | $ 264,000 | $ 594,000 | $ 1,455,300 |
Fair Value Measurements (Details) - Schedule of change in fair value of warrant liabilities - Private Placement Warrants [Member] - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Sep. 30, 2021 |
Jun. 30, 2021 |
Mar. 31, 2021 |
|
| Fair Value Measurements (Details) - Schedule of change in fair value of warrant liabilities [Line Items] | |||
| Fair Value at beginning balance | $ 5,610,000 | $ 4,051,080 | |
| Initial measurement on February 5, 2021 | 5,627,820 | ||
| Change in valuation | (660,000) | 1,558,920 | (1,576,740) |
| Fair Value at ending balance | $ 4,950,000 | $ 5,610,000 | $ 4,051,080 |
Fair Value Measurements (Details) - Schedule of inputs into Monte Carlo simulation - $ / shares |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2022 |
Dec. 31, 2021 |
|
| Schedule Of Inputs Into Monte Carlo Simulation Abstract | ||
| Risk-free interest rate | 3.97% | 1.30% |
| Expected term remaining (years) | 5 years 2 months 4 days | 5 years 7 months 2 days |
| Expected volatility | 5.90% | 9.90% |
| Underlying stock price (in Dollars per share) | $ 9.84 | $ 9.76 |