ATLASUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
For the transition period from to
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(Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
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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 (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See 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 7, 2022, there were
ATLAS CREST INVESTMENT CORP. II
TABLE OF CONTENTS
PART 1 – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ATLAS CREST INVESTMENT CORP. II
CONDENSED BALANCE SHEETS
| September 30, 2022 |
| December 31, 2021 | |||
(Unaudited) | ||||||
ASSETS | ||||||
Current assets: | ||||||
Cash | $ | | $ | | ||
Prepaid expenses and other current assets | |
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Total current assets | | | ||||
Investments held in Trust Account |
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TOTAL ASSETS | $ | | $ | | ||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||
Current liabilities: | ||||||
Accounts payable | $ | | $ | | ||
Accrued expenses | |
| | |||
Accrued compensation | | — | ||||
Income tax payable | | — | ||||
Franchise tax payable | | | ||||
Convertible promissory note - related party | | — | ||||
Total current liabilities | | | ||||
Warrant liabilities | | | ||||
Total Liabilities | |
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Commitments and Contingencies (Note 6) |
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Class A common stock, $ | | | ||||
Stockholders’ Deficit: |
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Preferred stock, $ | ||||||
Class A common stock, $ |
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Class B common stock, $ | |
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Additional paid-in capital | — |
| — | |||
Accumulated deficit | ( |
| ( | |||
Total Stockholders’ Deficit | ( |
| ( | |||
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | | $ | | ||
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
ATLAS CREST INVESTMENT CORP. II
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended | Nine months ended | |||||||||||
| September 30, 2022 |
| September 30, 2021 |
| September 30, 2022 |
| September 30, 2021 | |||||
Operating and formation costs | $ | | $ | | $ | | $ | | ||||
Franchise tax expense | | | | | ||||||||
Loss from operations | ( | ( | ( | ( | ||||||||
Gain on investments held in Trust Account | | | | | ||||||||
Loss on sale of private placement warrants | — | — | — | ( | ||||||||
Expensed offering costs | — | — | — | ( | ||||||||
Gain on change in fair value of warrant liabilities | | | | | ||||||||
Gain on change in fair value convertible promissory note - related party | | — | | — | ||||||||
Income before income taxes | | | | | ||||||||
Income tax expense | ( | — | ( | — | ||||||||
Net income | $ | | $ | | $ | | $ | | ||||
Basic and diluted weighted average shares outstanding, Class A common stock | | | | | ||||||||
Basic and diluted net income per share, Class A common stock | | | | | ||||||||
Basic and diluted weighted average shares outstanding, Class B common stock | | | | | ||||||||
Basic and diluted net income per share, Class B common stock | | | | | ||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
ATLAS CREST INVESTMENT CORP. II
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
Common Stock | |||||||||||||||||||
| Class A | Class B | Additional | Accumulated | Total Stockholders’ | ||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Paid-in Capital |
| Deficit |
| Deficit | ||||||
Balance — December 31, 2021 | | $ | | | $ | | $ | | $ | ( | $ | ( | |||||||
Proceeds received in excess of initial fair value of convertible promissory note - related party |
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| — | — | — |
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Net income | — | — | — | — | — | | | ||||||||||||
Balance - March 31, 2022 | — | — | | | | ( | ( | ||||||||||||
Stock-based compensation | — | — | — | — | | — | | ||||||||||||
Accretion of Class A common stock to redemption amount |
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| — | — | — |
| ( |
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Net income | — | — | — | — | — | | | ||||||||||||
Balance — June 30, 2022 |
| — | — | | | | ( | ( | |||||||||||
Proceeds received in excess of initial fair value of convertible promissory note - related party | — | — | — | — | | — | | ||||||||||||
Stock-based compensation | — | — | — | — | | — | | ||||||||||||
Accretion of Class A common stock to redemption amount | — | — | — | — | ( | ( | ( | ||||||||||||
Net income | — | — | — | — | — | | | ||||||||||||
Balance – September 30, 2022 |
| — | $ | — | | $ | | $ | — | $ | ( | $ | ( | ||||||
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
Common Stock | |||||||||||||||||||
Class A | Class B | Additional | Accumulated | Total Stockholders’ | |||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
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| Deficit |
| Equity (Deficit) | ||||||
Balance - December 31, 2020 | $ | | | $ | | $ | | $ | ( | $ | | ||||||||
Accretion of Class A common stock to redemption amount |
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Net income | — | — | — | — | — | | | ||||||||||||
Balance - March 31, 2021 | — | — | | | — | ( | ( | ||||||||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||
Balance - June 30, 2021 | — | — | | | — | ( | ( | ||||||||||||
Net loss | — | — | — | — | — | | | ||||||||||||
Balance – September 30, 2021 |
| — | $ | — | | $ | | $ | — | $ | ( | $ | ( | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
ATLAS CREST INVESTMENT CORP. II
CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
Nine Months Ended | ||||||
September 30, 2022 | September 30, 2021 | |||||
Cash Flows from Operating Activities: |
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Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||
Stock-based compensation expense | | — | ||||
Expensed offering costs | — | | ||||
Gain on change in fair value of convertible note | ( | — | ||||
Gain on investments held in Trust Account | ( | ( | ||||
Loss on sale of private placement warrants | — | | ||||
Gain on change in fair value of warrant liabilities | ( | ( | ||||
Changes in operating assets and liabilities: | ||||||
Prepaid expenses and other current assets | | ( | ||||
Accounts payable | ( | | ||||
Accrued expenses | | ( | ||||
Accrued compensation | | — | ||||
Income tax payable | | — | ||||
Franchise tax payable | ( | | ||||
Net cash used in operating activities | ( | ( | ||||
Cash Flows from Investing Activities: | ||||||
Cash deposited in Trust Account | — | ( | ||||
Proceeds from Trust Account to pay franchise tax | | — | ||||
Proceeds from Trust Account to pay income taxes | | — | ||||
Net cash provided by (used in) investing activities | | ( | ||||
Cash Flows from Financing Activities: | ||||||
Proceeds from issuance of convertible promissory note - related party | | — | ||||
Repayment of promissory note to related party | — | ( | ||||
Proceeds from initial public offering, net of underwriter’s discount paid | — | | ||||
Proceeds from sale of private placement warrants | — | | ||||
Offering costs paid | — | ( | ||||
Net cash provided by financing activities | | | ||||
Net Change in Cash | | ( | ||||
Cash - Beginning of Period | | | ||||
Cash - End of Period | $ | | $ | | ||
Supplemental disclosure of noncash investing and financing activities: | ||||||
Accretion of Class A common stock subject to possible redemption to redemption value | $ | | $ | | ||
Reclassification of deferred offering costs to equity upon completion of the initial public offering | $ | — | $ | | ||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
NOTE 1. DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS AND GOING CONCERN
Atlas Crest Investment Corp. II (the “Company” or “Atlas”) is a blank check company incorporated in Delaware on December 21, 2020. The Company was formed for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with
As of September 30, 2022, the Company had not commenced any operations. All activity for the period from December 21, 2020 (inception) through September 30, 2022 relates to the Company’s formation, the initial public offering (“Initial Public Offering”) as described below, and since the closing of the Initial Public Offering, the search for a prospective initial Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income or gains on investments on the cash and investments held in a trust account from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The registration statement for the Company’s Initial Public Offering was declared effective on February 3, 2021. On February 8, 2021, the Company consummated the Initial Public Offering of
Following the closing of the Initial Public Offering on February 8, 2021, an amount of $
Transaction costs related to the issuances described above amounted to $
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. New York Stock Exchange rules provide that the Business Combination must be with
The Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders are entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $
5
The Company will proceed with the Business Combination only if the Company has net tangible assets of at least $
Notwithstanding the above, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Public Shares, without the prior consent of the Company.
The Sponsor has agreed (a) to waive its redemption rights with respect to its Founder Shares and Public Shares held by it in connection with the completion of a Business Combination, (b) to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within
The Company will have until February 8, 2023 to complete a Business Combination (the “Combination Period”). If the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than 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 tax obligations (less up to $
6
In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $
Going Concern Consideration
In connection with the Company’s assessment of going concern considerations in accordance with FASB’s Accounting Standards Update (“ASU”) 2014-15, Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management has determined that if the Company is unable to raise additional funds to alleviate liquidity needs, obtain approval for an extension of the deadline or complete a Business Combination by February 8, 2023, then the Company will cease all operations except for the purpose of liquidating. The liquidity condition and date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s ability to continue as a going concern one year from the date that these financial statements are issued. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be unable to continue as a going concern.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations, and/or search for a target company, the specific impact is not readily determinable as of the date of these 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 financial statements and 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 financial statements.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements of the Company are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K as filed with the SEC on March 18, 2022. The interim results for the periods presented are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future interim periods.
7
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. The Company has implemented the aforementioned exemptions.
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 unaudited condensed 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.
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. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did
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 are invested in U.S. Treasury securities. All of the Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are included in gain on investments held in Trust Account in the accompanying statements of operations. Interest income from investments held in Trust Account is included in gain on investments held in Trust Account in the accompanying statements of operations. The estimated fair values of investments held in Trust Account are determined using available market information.
8
Class A Common Stock Subject to Possible Redemption
All of the
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid-in capital and accumulated deficit. The redemption value of the redeemable common stock as of September 30, 2022 increased as the income earned on the Trust Account exceeds the Company’s expected tax obligations plus up to $
As of September 30, 2022 and December 31, 2021, the Class A common stock subject to redemption reflected in the balance sheet are reconciled in the following table:
Gross proceeds |
| $ | |
Less: |
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Proceeds allocated to Public Warrants |
| ( | |
Issuance costs allocated to Class A common stock |
| ( | |
Plus: |
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Accretion of carrying value to redemption value |
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Class A common stock subject to possible redemption at December 31, 2021 | | ||
Accretion of carrying value to redemption value | | ||
Class A common stock subject to possible redemption at September 30, 2022 | $ | |
Offering Costs associated with the Initial Public Offering
The Company complies with the requirements of ASC Topic 340, Other Assets and Deferred Costs (“ASC 340”) and SEC Staff Accounting Bulletin Topic 5A - Expenses of Offering. Offering costs directly attributable to the issuance of an equity contract to be classified in equity are recorded as a reduction in equity. Offering costs for equity contracts that are classified as assets and liabilities are expensed immediately. The Company incurred offering costs amounting to $
Warrant Liabilities
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 and ASC Topic 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
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For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The initial fair value of the Public Warrants was estimated using a Monte Carlo simulation approach and the initial and subsequent fair value of the Private Placement Warrants was estimated using a Modified Black-Scholes model. The subsequent measurement of the fair value of the Public Warrants was measured using quoted market prices (see Note 9).
Convertible Promissory Note - Related Party
The Company accounts for the convertible promissory notes under ASC 815. The Company has made the election under 815-15-25 to account for the notes under the fair value option. Using the fair value option, the convertible promissory notes are required to be recorded at their initial fair value on the date of issuance, and each balance sheet thereafter. Differences between the face value of the note and fair value at issuance are recognized as either an expense in the statement of operations (if issued at a premium) or as a capital contribution (if issued at a discount). Changes in the estimated fair value of the notes are recognized as non-cash gains or losses in the statement of operations.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation - Stock Compensation (“ASC 718”). Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date and recognized over the requisite service period. To the extent a stock-based award is subject to a performance condition, the amount of expense recorded in a given period, if any, reflects an assessment of the probability of achieving such performance condition, with compensation recognized once the event is deemed probable to occur. Forfeitures are recognized as incurred.
Income Taxes
The Company complies with the accounting and reporting requirements of ASC Topic 740, Income Taxes (“ASC 740”), which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were
While ASC 740 identifies usage of an effective annual tax rate for purposes of an interim provision, it does allow for estimating individual elements in the current period if they are significant, unusual or infrequent. Computing the effective tax rate for the Company is complicated due to the potential impact of the Company’s change in fair value of warrants (or any other change in fair value of a complex financial instrument), the timing of any potential business combination expenses and the actual interest income that will be recognized during the year. The Company has taken a position as to the calculation of income tax expense in a current period based on ASC 740-270-25-3 which states, “If an entity is unable to estimate a part of its ordinary income (or loss) or the related tax (benefit) but is otherwise able to make a reasonable estimate, the tax (or benefit) applicable to the item that cannot be estimated shall be reported in the interim period in which the item is reported.” The Company believes its calculation to be a reliable estimate and allows it to properly take into account the usual elements that can impact its annualized book income and its impact on the effective tax rate. As such, the Company is computing its taxable income and associated income tax provision based on actual results through September 30, 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
10
U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023 (the “Excise Tax”). 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
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, votes relating to certain amendments to the Company’s Amended and Restated Certificate of Incorporation 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, votes relating to certain amendments to the Company’s Amended and Restated Certificate of Incorporation 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. 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 effect an extension of the time in which the Company must complete a Business Combination or complete a Business Combination. Further, the application of the Excise Tax in the event of a liquidation is uncertain.
See Note 10 for additional information on income taxes for the periods presented.
Net Income Per Share of Common Stock
Net income per common share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Accretion associated with the redeemable shares of Class A common stock is excluded from net income per share as the redemption value approximates fair value. Therefore, the earnings per share calculation allocates income and losses shared pro rata between Class A and Class B common stock. As a result, the calculated net income per share is the same for Class A and Class B shares of common stock. The Company has not considered the effect of the Public Warrants and Private Placement Warrants to purchase an aggregate of
The following table reflects the calculation of basic and diluted net income per common share (in dollars, except per share amounts):
Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||||||||||
September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||||||||||||
| Class A |
| Class B |
| Class A |
| Class B |
| Class A |
| Class B |
| Class A |
| Class B | |||||||||
Basic and diluted net income per share: | ||||||||||||||||||||||||
Numerator: | ||||||||||||||||||||||||
Net income | $ | | $ | | $ | | $ | | $ | $ | | $ | | $ | | |||||||||
Denominator: | ||||||||||||||||||||||||
Basic and diluted weighted average shares outstanding | | | | | | | | | ||||||||||||||||
Basic and diluted net income per share | | | | | | | | | ||||||||||||||||
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
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Fair Value of Financial Instruments
The Company applies ASC Topic 820, Fair Value Measurement (“ASC 820”), which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.
The carrying amounts reflected in the balance sheet for current assets and current liabilities (with the exception of the convertible promissory note - related party) approximate fair value due to their short-term nature.
Level 1 — Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2 — Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.
See Note 9 for additional information on assets and liabilities measured at fair value.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
The registration statement for the Company’s Initial Public Offering was declared effective on February 3, 2021. On February 8, 2021, the Company completed its Initial Public Offering of
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of
The Company recognized a loss on the sale of the Private Placement Warrants of $
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NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On December 23, 2020, the Sponsor paid $
The Sponsor has agreed not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (A)
Stock-Based Compensation
On January 15, 2021, the Sponsor transferred to each of the Company’s
On October 4, 2021, the Sponsor transferred to
On December 21, 2021,
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On June 2, 2022, the second Original Director resigned from the board of directors of the Company. In connection with the resignation, the second Original Director and the Sponsor entered into an ‘Agreement for the Redemption of Invested Capital Membership Interest and Retention of Granted Membership Interest’ (the “Retention Agreement”), pursuant to which the second Original Director retained his Interest in
On June 3, 2022, the Sponsor and the Third Director amended and restated the Transfer Agreement (the “Amended and Restated Transfer Agreement”), pursuant to which the Third Director (i) forfeited a portion of her original Interest representing
On June 3, 2022, a new director (the “Fourth Director”) was appointed to the board of directors. Upon appointment, the Fourth Director entered into a securities transfer agreement with the Sponsor, pursuant to which the Fourth Director was granted an Interest in the Sponsor representing
Cash Compensation
In addition to the Interests in the Sponsor, the Third Director and Fourth Director were granted cash compensation of $
Promissory Note - Related Party
On December 29, 2020, the Company issued an unsecured promissory note to the Sponsor (the “Promissory Note”), pursuant to which the Company received proceeds of $
Due from Sponsor
As of December 31, 2021, the Company was due $
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Administrative Support Agreement
The Company entered into an agreement, commencing on the effective date of the Initial Public Offering, to pay the Sponsor a total of $
See Note 6, under Business Combination Marketing Agreement and Related Party Loans, for additional related party transactions.
NOTE 6. COMMITMENTS
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued upon conversion of the Working Capital Loans (as defined below) (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares) are entitled to registration rights pursuant to a registration rights agreement signed prior to the Initial Public Offering, requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to Class A common stock). The holders of these securities are entitled to make up to
Business Combination Marketing Agreement
The Company engaged the representative of the underwriters and Moelis & Company LLC, an affiliate of the Sponsor, in connection with a Business Combination to assist the Company in holding meetings with its stockholders to discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities in connection with a Business Combination, assist the Company in obtaining stockholder approval for the Business Combination and assist the Company with its press releases and public filings in connection with the Business Combination. The Company will pay the representative of the underwriters and Moelis & Company LLC a cash fee for such services upon the consummation of the Business Combination of
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s directors and officers may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $
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NOTE 7. WARRANTS
Warrants — Public Warrants may only be exercised for a whole number of shares. No fractional shares are issued upon exercise of the Public Warrants. The Public Warrants are exercisable on the later of (a)
The Company will not be obligated to deliver any Class A common stock pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant exercise unless a registration statement under the Securities Act covering the issuance of the Class A common stock issuable upon exercise of the Public Warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
The Company has agreed that as soon as practicable, but in no event later than
Once the Public Warrants become exercisable, the Company may call the Public Warrants for redemption:
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon not less than |
| ● | if, and only if, the closing price of the common stock equals or exceeds $ |
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If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
The exercise price and number of Class A common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $
The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the common shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until
There were
The accounting treatment of derivative financial instruments required that the Company record the warrants as derivative liabilities at fair value upon the closing of the Initial Public Offering. The Public Warrants were allocated a portion of the proceeds from the issuance of the Units equal to its fair value. The warrant liabilities are subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liabilities are adjusted to current fair value, with the change in fair value recognized in the Company’s statement of operations. The Company will reassess the classification at each balance sheet date. If the classification changes as a result of events during the period, the warrants will be reclassified as of the date of the event that causes the reclassification.
NOTE 8. STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred stock — The Company is authorized to issue
Class A common stock — The Company is authorized to issue up to
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Class B common stock — The Company is authorized to issue up to
Holders of Class A common stock and Class B common stock will vote together as a single class on all other matters submitted to a vote of shareholders, except as required by law.
The shares of Class B common stock will automatically convert into shares of Class A common stock upon the consummation of a Business Combination on a
NOTE 9. FAIR VALUE MEASUREMENTS
The following table presents information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis 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:
Amount at | ||||||||||||
Description |
| Fair Value |
| Level 1 |
| Level 2 |
| Level 3 | ||||
September 30, 2022 | ||||||||||||
Assets | ||||||||||||
Investments held in Trust Account: |
|
|
|
|
|
| ||||||
Money Market investments | $ | | $ | | $ | — | $ | — | ||||
Liabilities | ||||||||||||
Warrant liability – Public Warrants | $ | | $ | | $ | — | $ | — | ||||
Warrant liability – Private Placement Warrants | $ | | $ | — | $ | — | $ | | ||||
Convertible promissory note - related party | $ | | $ | — | $ | — | $ | | ||||
December 31, 2021 | ||||||||||||
Assets | ||||||||||||
Investments held in Trust Account: | ||||||||||||
Money Market investments | $ | | $ | | $ | — | $ | — | ||||
Liabilities | ||||||||||||
Warrant liability – Public Warrants | $ | | $ | | $ | — | $ | — | ||||
Warrant liability – Private Placement Warrants | $ | | $ | — | $ | — | $ | | ||||
The Company utilized a Monte Carlo simulation model for the initial valuation of the Public Warrants. The subsequent measurement of the Public Warrants as of September 30, 2022 and December 31, 2021 is classified as Level 1 due to the use of an observable market quote in an active market under the ticker ACII WS. The quoted price of the Public Warrants was $
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The Company utilizes a Modified Black-Scholes model to value the Private Placement Warrants at each reporting period, with changes in fair value recognized in the statement of operations. The estimated fair value of the Private Placement Warrant liability is determined using Level 3 inputs. Inherent in a Modified Black-Scholes options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.
The aforementioned warrant liabilities are not subject to qualified hedge accounting.
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 in the table above transferred from a Level 3 measurement to a Level 1 fair value measurement in March 2021 when the Public Warrants were separately listed and traded.
The following table provides the significant inputs to the Monte Carlo Simulation for the initial fair value of the Public Warrants:
| As of February 8, |
| ||
2021 (Initial | ||||
Measurement) | ||||
Stock price |
| $ | |
|
Strike price |
| $ | |
|
Probability of completing a Business Combination |
| | % | |
Expected life of the option to convert (in years) |
| |
| |
Volatility |
|
| ||
Risk-free rate |
| | % | |
Fair value of warrants |
| $ | |
|
The following table provides the significant inputs to the Modified Black-Scholes model for the fair value of the Private Placement Warrants:
| As of February |
| ||||||||
As of September 30, |
| As of December 31, | 8, 2021 (Initial |
| ||||||
| 2022 |
| 2021 |
| Measurement) | |||||
Stock price | $ | | $ | | $ | | ||||
Strike price | $ | | $ | | $ | | ||||
Probability of completing a Business Combination |
| | % | * |
| | % | |||
Dividend yield | — | % | — | % | — | % | ||||
Remaining term (in years) |
| | |
| | |||||
Volatility |
|
| | % | | % |
| | % | |
Risk-free rate | | % | | % | | % | ||||
Fair value of warrants | $ | | $ | | $ | | ||||
* | The probability of completing a Business Combination is considered within the volatility implied by the traded price of the Public Warrants which is used to value the Private Placement Warrants. |
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The convertible promissory note - related party was valued using a combination of Black-Scholes and Discounted Cash Flows methods, which is considered to be a Level 3 fair value measurement. The estimated fair value of the convertible promissory note - related party was based on the following significant inputs:
| As of August 26, |
| As of February 4, |
| ||||||
As of September 30, | 2022 (Initial | 2022 (Initial |
| |||||||
2022 | Measurement) | Measurement) |
| |||||||
Warrant price | $ | | $ | | $ | | ||||
Conversion price | $ | | $ | | $ | | ||||
Expected term | | | | |||||||
Warrant volatility | | % | | % | | % | ||||
Risk free rate | | % | | % | | % | ||||
Discount rate | | % | | % | | % | ||||
Probability of completing a Business | | % | | % | | % | ||||
Fair value convertible promissory note - related party | $ | | $ | | $ | | ||||
The following table presents the changes in the fair value of the Company’s Level 3 financial instruments that are measured at fair value:
Fair value as of December 31, 2020 | $ | — | |
Initial measurement of Public Warrants and Private Placement Warrants at February 8, 2021 |
| | |
Transfer of Public Warrants to Level 1 measurement | ( | ||
Change in fair value | ( | ||
Fair value as of March 31, 2021 | | ||
Change in fair value |
| | |
Fair value as of June 30, 2021 | | ||
Change in fair value | ( | ||
Fair value as of September 30, 2021 | $ | |
Fair value as of December 31, 2021 | $ | | |
Initial measurement of convertible promissory note - related party on February 4, 2022 |
| | |
Change in fair value | ( | ||
Fair value as of March 31, 2022 | | ||
Change in fair value | ( | ||
Fair value as of June 30, 2022 | | ||
Initial measurement of convertible promissory note - related party draw on August 26, 2022 | | ||
Change in fair value |
| ( | |
Fair value as of September 30, 2022 | $ | |
The Company recognized gains in connection with changes in the fair value of the Public Warrants and Private Placement Warrants of $
The Company recognized gains in connection with changes in the fair value of the Public Warrants and Private Placement Warrants of $
The Company recognized gains on the change in fair value of convertible promissory note - related party of $
The Company did
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NOTE 10. INCOME TAX
The Company’s effective tax rate for the three and nine months ended September 30, 2022 was
NOTE 11. 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, other then described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
On October 25, 2022, the Company filed a preliminary proxy statement to seek stockholder approval to adopt amendments to its Amended and Restated Certificate of Incorporation to allow the Company to redeem all of its outstanding public shares and liquidate no later than December 30, 2022, in advance of the automatic termination date in its current Certificate of Incorporation of February 8, 2023.
On October 26, 2022, the NYSE notified the Company, and publicly announced, that the NYSE determined to commence proceedings to delist the Company’s warrants from the NYSE and that trading in the Company’s warrants would be suspended immediately. As a result of the expected expiration of the warrants with the expected liquidation of the Company, the Company does not intend to appeal the NYSE’s determination.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Atlas Crest Investment Corp. II. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Atlas Crest Investment II LLC. 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 Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements other than statements of historical fact included in this Form 10-Q including statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K for the year ending December 31, 2021 filed with the SEC on March 18, 2022. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated on December 21, 2020 as a Delaware corporation and formed for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this Report as our “initial business combination”. 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 (pursuant to forward purchase agreements or backstop agreements we may enter into following the consummation of the initial public offering or otherwise), 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.
Recent Events
On October 25, 2022, the Company filed a preliminary proxy statement to seek stockholder approval to adopt amendments to its Amended and Restated Certificate of Incorporation to allow the Company to redeem all of its outstanding public shares and liquidate no later than December 30, 2022, in advance of the automatic termination date in its current Certificate of Incorporation of February 8, 2023.
On October 26, 2022, the NYSE notified the Company, and publicly announced, that the NYSE determined to commence proceedings to delist the Company’s warrants from the NYSE and that trading in the Company’s warrants would be suspended immediately. As a result of the expected expiration of the warrants with the expected liquidation of the Company, the Company does not intend to appeal the NYSE’s determination.
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Results of Operations
We have neither engaged in any operations nor generated any revenues to date. All activity for the period from December 21, 2020 (inception) through September 30, 2022 were organizational activities, those necessary to prepare for the initial public offering, described below. We do not expect to generate any operating revenues until after the completion of our initial business combination. We generate non-operating income in the form of interest income on cash and cash equivalents held after the initial public offering. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as due diligence expenses.
For the three months ended September 30, 2022, we had net income of $2,493,620, which resulted from a gain on the change in fair value of warrant liabilities of $1,455,834, gains on marketable securities held in trust account in the amount of $1,931,986, and a gain on the change in fair value of convertible promissory note-related party of $41,000, offset in part by operating and formation costs of $436,923, franchise tax expense of $50,000, and income tax expense of $448,277.
For the three months ended September 30, 2021, we had a net income of $4,247,370 which resulted from a gain on change in the fair value of warrant liabilities of $4,545,504, and gains on marketable securities held in Trust Account in the amount of $40,875, offset in part by operating and formation costs of $288,736 and franchise tax expense of $50,273.
For the nine months ended September 30, 2022, we had net income of $12,163,958, which resulted from a gain on the change in the fair value of warrant liabilities of $11,414,833, gains on marketable securities held in Trust Account in the amount of $2,603,778, and a gain on change in fair value of convertible promissory note - related party in the amount of $154,200, offset in part by operating and formation costs of $1,365,446, franchise tax expense of $150,050, and income tax expense of $493,357.
For the nine months ended September 30, 2021, we had net income of $8,536,965, which resulted from a gain on change in the fair value of warrant liabilities of $9,754,087, and gains on investments held in the Trust Account in the amount of $70,631, offset in part by operating costs of $729,981, expensed offering costs of $289,922, franchise tax expense of $149,180, and a loss on the sale of private placement warrants of $118,670.
Liquidity and Capital Resources
On February 8, 2021, we consummated an initial public offering of 34,500,000 units generating gross proceeds to the Company of $345,000,000. Simultaneously with the consummation of the initial public offering, we completed the private sale of 5,933,333 warrants to the Sponsor at a purchase price of $1.50 per warrant (the “Private Placement Warrants”), generating gross proceeds of $8,900,000. The proceeds from the sale of the Private Placement Warrants were added to the net proceeds from the initial public offering held in a trust account (the “Trust Account”). If we do not complete an initial business combination within 24 months from the closing of the initial public offering, the proceeds from the sale of the Private Placement Warrants will be used to fund the redemption of the public shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.
For the nine months ended September 30, 2022, net cash used in operating activities was $1,251,384, which was primarily due to operational costs and franchise taxes paid during the period.
For the nine months ended September 30, 2021, net cash used in operating activities was $1,327,299, which was due to a non-cash gain on the change in fair value of warrant liabilities of $9,754,087, changes in working capital of $448,138, unrealized gain on investments in the Trust Account of $68,553 and interest and dividend income on investments held in Trust Account of $2,078 offset in part by our net income of $8,536,965, expensed offering costs added back to net income of $289,922, and a non-cash loss on the sale of private placement warrants of $118,670.
For the nine months ended September 30, 2022, net cash provided by investing activities of $385,000 was the result of proceeds transferred from our Trust Account used to pay taxes.
For the nine months ended September 30, 2021, net cash used in investing activities of $345,000,000 was the result of the amount of net proceeds from the Initial Public Offering being deposited to the Trust Account.
For the nine months ended September 30, 2022 net cash provided by financing activities of $1,050,000 was comprised of proceeds from the working capital loan with our Sponsor.
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For the nine months ended September 30, 2021, net cash provided by financing activities of $346,256,451 was comprised of $338,100,000 in proceeds from the issuance of Units in the initial public offering net of underwriter’s discount paid and $8,900,000 in proceeds from the issuance of warrants in a private placement to our Sponsor, offset in part by the payment of $443,549 for offering costs associated with the initial public offering and repayment of the outstanding balance on the promissory note to our Sponsor of $300,000.
As of September 30, 2022 and December 31, 2021, we had cash of $308,920 and $125,304, respectively, held outside the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a business combination.
In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required on a non-interest basis “Working Capital Loans”. If we complete our initial business combination, we would repay such loaned amounts. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants of the post business combination entity at a price of $1.50 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants. On February 3, 2022, we entered into a Working Capital Loan with our Sponsor, pursuant to which we received proceeds of $750,000, subject to the terms described above with respect to the Working Capital Loans except that this Working Capital Loan is only repayable in the event an Initial Business Combination is consummated. On August 26, 2022, the Company drew down an additional $300,000 under the Working Capital Loans.
We have incurred and expect to continue to incur significant costs in pursuit of our acquisition plans. These conditions raise substantial doubt about our ability to continue as a going concern for a period of time within one year after the date that the accompanying financial statements are issued. We plan to address this uncertainty through our initial business combination. There is no assurance that our plans to consummate our initial business combination will be successful or successful within 24 months from the effective date of our initial public offering. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Moreover, we may need to obtain additional financing either to complete our business combination or because we become obligated to redeem a significant number of public shares upon completion of our business combination, in which case we may issue additional securities or incur debt in connection with such business combination. In addition, we intend to target businesses larger than we could acquire with the net proceeds of our initial public offering and the sale of the private placement units and may as a result be required to seek additional financing to complete such proposed initial business combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our business combination. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. In addition, following our business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of September 30, 2022 or December 31, 2021.
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Contractual Obligations
Registration Rights
The holders of the founder shares, Private Placement Warrants and any warrants that may be issued upon conversion of the Working Capital Loans (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the founder shares) will be entitled to registration rights pursuant to a registration rights agreement that was effective with the initial public offering, requiring us to register such securities for resale (in the case of the founder shares, only after conversion to Class A common stock). The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering our securities. We will bear the expenses incurred in connection with the filing of any such registration statements.
Business Combination Marketing Agreement
We engaged the representative of the underwriters and Moelis & Company LLC, an affiliate of the Sponsor, in connection with a Business Combination to assist us in holding meetings with our stockholders to discuss the potential Business Combination and the target business’ attributes, introduce us to potential investors that are interested in purchasing our securities in connection with a Business Combination, assist us in obtaining stockholder approval for the Business Combination and assist us with press releases and public filings in connection with the Business Combination. We will pay the representative of the underwriters and Moelis & Company LLC a cash fee for such services upon the consummation of the Business Combination of 2.25% ($7,762,500) and 1.25% ($4,312,500), respectively, or 3.5% ($12,075,000), in the aggregate, of the gross proceeds of the initial public offering. A portion of such fee may be re-allocated or paid to members of FINRA that assist us in consummating our Business Combination.
Working Capital Loan
On February 4, 2022, we entered into a Working Capital Loan with our Sponsor (the “Sponsor Working Capital Loan”), pursuant to which we received proceeds of $750,000. On August 26, 2022, the Company drew down an additional $300,000 under the Sponsor Working Capital Loan. The Sponsor Working Capital Loan is non-interest bearing and payable upon the completion of a Business Combination. The Sponsor Working Capital Loan may be convertible into warrants of the post-Business Combination entity at the option of our Sponsor at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants.
Cash Compensation
Two of our directors were granted cash compensation of $75,000 and $81,250 (or a pro rata amount based on time served and a service period end date of February 3, 2023 in the event the director terminates from the Company prior to an initial Business Combination), respectively, to be paid upon consummation of a Business Combination or the Company’s liquidation. In the event of the Company’s liquidation, the Sponsor will pay such amounts.
Critical Accounting Policies
The preparation of unaudited condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
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Warrant Liabilities
We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC Topic 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to our own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The initial fair value of the public warrants was estimated using a Monte Carlo simulation approach and the initial and subsequent fair value of the private placement warrants was estimated using a Modified Black-Scholes model. The subsequent measurement of the fair value of the public warrants was measured using quoted market prices.
Convertible Promissory Note - Related Party
We account for the convertible promissory notes under ASC 815. We have made the election under 815-15-25 to account for the notes under the fair value option. Using the fair value option, the convertible promissory note is required to be recorded at their initial fair value on the date of issuance, and each balance sheet thereafter. Differences between the face value of the note and fair value at issuance are recognized as either an expense in the statement of operations (if issued at a premium) or as a capital contribution (if issued at a discount). Changes in the estimated fair value of the notes are recognized as non-cash gains or losses in the statement of operations.
Common stock subject to possible redemption
All of the 34,500,000 shares of Class A common stock sold as part of the units in our initial public offering contain a redemption feature which allows for the redemption of such public shares in connection with our liquidation, if there is a stockholder vote or tender offer in connection with our initial business combination and in connection with certain amendments to our 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 redemption to be classified outside of permanent equity. Therefore, all Class A common stock sold as part of the units in our initial public offering has been classified outside of permanent equity.
We recognize changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated deficit.
Net Income (Loss) Per Share of Common Stock
Net income (loss) per share of common stock is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Accretion associated with the redeemable shares of Class A common stock is excluded from net income (loss) per share as the redemption value approximates fair value. Therefore, the earnings per share calculation allocates income and losses shared pro rata between Class A and Class B common stock. As a result, the calculated net income (loss) per share is the same for Class A and Class B shares of common stock. We have not considered the effect of the Public Warrants and Private Placement Warrants to purchase an aggregate of 14,558,333 shares in the calculation of diluted net income (loss) per share, since the exercise of the warrants are contingent upon the occurrence of future events.
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Stock-Based Compensation
We account for stock-based compensation in accordance with ASC Topic 718, Compensation - Stock Compensation (“ASC 718”). Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date and recognized over the requisite service period. To the extent a stock-based award is subject to a performance condition, the amount of expense recorded in a given period, if any, reflects an assessment of the probability of achieving such performance condition, with compensation recognized once the event is deemed probable to occur. Forfeitures are recognized as incurred.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
This item is not applicable as we are a smaller reporting company.
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Item 4. Controls and Procedures.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2022, due to a failure to correctly apply the nuances of the complex accounting standards that apply to our financial statements, including with respect to certain complex financial instruments which resulted in restatements to our Form 10-Q. In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our unaudited interim financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
Changes in Internal Control Over Financial Reporting
Other than the implementation of the material weakness remediation activities described below, during the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Management has enhanced our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements to address the material weakness. Our updated processes include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
Excise Tax
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 of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023 (the “Excise Tax”). 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.
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, votes relating to certain amendments to the Company’s Amended and Restated Certificate of Incorporation 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, votes relating to certain amendments to the Company’s Amended and Restated Certificate of Incorporation 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. 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 effect an extension of the time in which the Company must complete a Business Combination or complete a Business Combination. Further, the application of the Excise Tax in the event of a liquidation is uncertain.
The risk factors disclosed in Item 1A of our Annual Report for the year ended December 31, 2021 and Item 1A of our Quarterly Report for the three months ended March 31, 2022 and six months ended June 30, 2022 are hereby incorporated by reference.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales
On December 23, 2020, our sponsor paid $25,000 in consideration for 7,187,500 shares of Class B common stock (the “Founder Shares”). In February 2021, the Company effected a stock dividend of 0.2 shares for each share of Class B common stock, resulting in an aggregate of 8,625,000 shares of Class B common stock issued and outstanding. Shares and the associated amounts have been retroactively restated in these financial statements to reflect the stock dividend. As of December 31, 2020, the Founder Shares included an aggregate of up to 1,125,000 shares subject to forfeiture by our sponsor to the extent that the underwriter’s over-allotment was not exercised in full or in part, so that our sponsor would collectively own, on an as-converted basis, 20% of the Company’s issued and outstanding shares after the initial public offering (assuming our sponsor did not purchase any public shares in the Initial Public Offering). The over-allotment option was exercised in full on February 8, 2021; thus, these shares are no longer subject to forfeiture. The Founder Shares were issued in connection with our organization pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
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Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 5,933,333 warrants at a price of $1.50 per warrant in a private placement (the “Private Placement Warrants”) to our Sponsor, generating gross proceeds of $8,900,000. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share. The sales of the Private Placement Warrants were made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. The proceeds from the sale of the Private Placement Warrants were added to the net proceeds from the Initial Public Offering held in the Trust Account.
Use of Proceeds
On February 8, 2021, the Company consummated the Initial Public Offering of 34,500,000 Units (the “Units” and, with respect to the shares of Class A common stock included in the Units sold, the “Public Shares”), including 4,500,000 Units that were issued pursuant to the underwriters’ exercise of their over-allotment option in full, at $10.00 per Unit, generating gross proceeds of $345,000,000.
Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 5,933,333 Private Placement Warrants at a price of $1.50 per warrant, generating gross proceeds of $8,900,000.
The underwriter was granted a 45-day option to purchase up to 4,500,000 additional Units to cover over-allotments at the Initial Public Offering price, less the underwriting discounts and commissions. The over-allotment option was exercised in full. The underwriter was paid a cash underwriting discount of $0.20 per Unit, or $6,900,000 in the aggregate upon the closing of the Initial Public Offering.
On December 29, 2020, we issued an unsecured promissory note to our Sponsor (the “Promissory Note”), pursuant to which we received proceeds of $300,000 to cover expenses related to the Initial Public Offering. The outstanding balance under the Promissory Note of $300,000 was repaid at the closing of the Initial Public Offering on February 8, 2021.
Transaction costs related to the issuances described above amounted to $7,343,549 consisting of $6,900,000 of underwriting fees and $443,549 of other offering costs. After deducting the underwriting discounts and commissions and offering expenses, the total net proceeds from the Initial Public Offering and the sale of the Private Placement Warrants were approximately $346,556,000, of which $345,000,000 (or $10.00 per share sold in the Initial Public Offering) was placed in the Trust Account.
On February 4, 2022, we entered into a Working Capital Loan with our Sponsor (the “Sponsor Working Capital Loan”), pursuant to which we received proceeds of $750,000. On August 26, 2022, the Company drew down an additional $300,000 under the Sponsor Working Capital Loan. The Sponsor Working Capital Loan is non-interest bearing and payable upon the completion of a Business Combination. The Sponsor Working Capital Loan may be convertible into warrants of the post-Business Combination entity at the option of our Sponsor at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
No. |
| Description of Exhibit |
31.1* | ||
31.2* | ||
32.1** | ||
32.2** | ||
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* | Filed herewith |
** | Furnished herewith |
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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.
| Atlas Crest Investment Corp. II | |
|
| |
Date: November 9, 2022 | By: | /s/ Michael Spellacy |
|
| Name: Michael Spellacy |
|
| Title: Chief Executive Officer |
| Atlas Crest Investment Corp. II | |
|
| |
Date: November 9, 2022 | By: | /s/ Christopher Callesano |
|
| Name: Christopher Callesano |
|
| Title: Chief Financial Officer |
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