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) | (IRS Employer Identification No.) |
| (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(s) | Name of each exchange on which registered | ||
| Units, each consisting of one share of Class A common stock, par value $0.0001 per share, and one-quarter of one redeemable warrant | FTPAU | Nasdaq Capital Market | ||
| Redeemable warrants, each whole warrant exercisable for one share of Class A common stock | FTPAW | Nasdaq Capital Market |
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 August 11, 2022,
FTAC PARNASSUS ACQUISITION CORP.
Form 10-Q
For the Quarter Ended June 30, 2022
Table of Contents
i
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
FTAC PARNASSUS ACQUISITION CORP.
CONDENSED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (Unaudited) | ||||||||
| Assets: | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Investments held in Trust Account | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit: | ||||||||
| Current liabilities: | ||||||||
| Accrued expenses | $ | $ | ||||||
| Franchise tax payable | ||||||||
| Income Tax Payable | ||||||||
| Total current liabilities | ||||||||
| Derivative warrant liabilities | ||||||||
| Deferred underwriting commissions | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Class A common stock subject to possible redemption, $ | ||||||||
| Stockholders’ Deficit: | ||||||||
| Preferred stock, $ | ||||||||
| Class A common stock, $ | ||||||||
| Class B common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
FTAC PARNASSUS ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three June 30, | For the Six June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| General and administrative expenses | $ | $ | $ | $ | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Change in fair value of derivative warrant liabilities | ||||||||||||||||
| Offering costs associated with derivative warrant liabilities | ( | ) | ||||||||||||||
| Interest earned on investments held in Trust Account | ||||||||||||||||
| Total Other income (expense), net | ||||||||||||||||
| Income before provision for income taxes | ||||||||||||||||
| Provision for income taxes | ( | ) | ( | ) | ||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Weighted average number of shares outstanding of Class A common stock | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Weighted average number of shares outstanding of Class B common stock | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
FTAC PARNASSUS ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Unaudited)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022
| Common Stock | Additional | Total | ||||||||||||||||||||||||||
| Class A | Class B | Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance – January 1, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance – March 31, 2022 (Unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Accretion of Class A common stock subject to possible redemption amount | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||
| Net income | — | — | — | |||||||||||||||||||||||||
| Balance – June 30, 2022 (Unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021
| Common Stock | Additional | Total Stockholders’ | ||||||||||||||||||||||||||
| Class A | Class B | Paid-In | Accumulated | Equity | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance – January 1, 2021 | — | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Sale of private placement units, less fair value of derivative warrant liabilities | ||||||||||||||||||||||||||||
| Forfeiture of Class B common stock | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Accretion of Class A common stock subject to possible redemption amount | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – March 31, 2021 (Unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net income | — | — | — | |||||||||||||||||||||||||
| Balance – June 30, 2021 (Unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
FTAC PARNASSUS ACQUISITION CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Six Months Ended June 30, | For the Six Months Ended June 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 derivative warrant liabilities | ( | ) | ( | ) | ||||
| Offering costs associated with derivative warrant liabilities | ||||||||
| General and administrative expenses paid by related party under promissory note | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Franchise tax payable | ( | ) | ||||||
| Accrued expenses | ( | ) | ||||||
| Income tax payable | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Investment of cash into Trust Account | ( | ) | ||||||
| Cash withdrawn from Trust Account for working capital purposes | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from stock subscription receivable | ||||||||
| Repayment of note payable to related party | ( | ) | ||||||
| Proceeds received from Initial Public Offering, gross | ||||||||
| Proceeds received from Private Placement | ||||||||
| Offering costs paid | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net Change in Cash | ( | ) | ||||||
| Cash – Beginning of period | ||||||||
| Cash – End of period | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Offering costs included in accounts payable and accrued expenses | $ | $ | ||||||
| Offering costs paid by related party under promissory note | $ | $ | ||||||
| Deferred underwriting commissions in connection with Initial Public Offering | $ | $ | ||||||
| Accretion of Class A common stock subject to possible redemption | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
FTAC
PARNASSUS ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1 - Description of Organization and Business Operations
FTAC Parnassus Acquisition Corp. (the “Company”), formerly known as FTAC General Acquisition Corp., is a blank check company incorporated in Delaware on December 18, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is an emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.
As of June 30, 2022, the Company had not commenced any operations. All activity through June 30, 2022 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”) described below, and, subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering and certain of the proceeds of the Private Placement placed in the Trust Account (defined below).
The
Company’s sponsors are FTAC Parnassus Sponsor, LLC, and FTAC Parnassus Advisors, LLC, each a Delaware limited liability company
(collectively, the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective
on March 11, 2021. On March 16, 2021, the Company consummated its Initial Public Offering of
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of
Upon
the closing of the Initial Public Offering and the Private Placement, $
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 Units, although substantially all of the net proceeds are intended to be applied generally toward
consummating a Business Combination. There is no assurance that the Company will be able to successfully effect a Business Combination.
Nasdaq rules provide that the Company must complete a Business Combination with one or more target businesses that together have an aggregate
fair market value of at least
The
Company will provide holders of the Public Shares (“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 stockholders will be entitled
to redeem their Public Shares for a pro rata portion of the amount then on deposit in the Trust Account (at $
5
FTAC
PARNASSUS ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The
Company will proceed with a Business Combination if the Company has net tangible assets of at least $
The
Company will also provide the public stockholders with the opportunity to redeem all or a portion of their Public Shares in connection
with any stockholder vote to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation (i) that would
affect the substance or timing of the Company’s obligation to redeem
The
Company will have until the expiration of the Combination Period to consummate its initial Business Combination. If the Company is unable
to consummate a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purposes
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 any interest earned on
the Trust Account not previously released to the Company to pay its tax obligations and up to $
The
Insiders and Millennium agreed to waive their redemption rights with respect to any Founder Shares and Placement Shares, as applicable,
Notwithstanding
the foregoing redemption rights, if the Company seeks stockholder approval of its Business Combination and it does not conduct redemptions
in connection with its Business Combination 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 an aggregate of
6
FTAC
PARNASSUS ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 condensed financial statements. The 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 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 condensed financial statements.
Liquidity and Capital Resources
As
of June 30, 2022, the Company had $
The
Company’s liquidity needs through June 30, 2022 were satisfied through a payment of $
Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity from the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will be using the funds held outside of the Trust Account for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Going Concern
In connection with the Company’s assessment of going concern considerations in accordance with FASB Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company has until March 16, 2023 to consummate a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. Management intends to complete a Business Combination by close of business on March 16, 2023. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after March 16, 2023.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements 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 with the instructions to Form 10-Q and Article 8 of Regulation S-X 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. Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected through December 31, 2022, or any future period.
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 17, 2022.
7
FTAC
PARNASSUS ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth 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 that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of the 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 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. One of the more significant accounting estimates included in these financial statements is the determination of the fair value of the warrant liabilities. Such estimates may be subject to change as more current information becomes available and accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had no cash equivalents as of June 30, 2022 and December 31, 2021.
Investments Held in the Trust Account
At
June 30, 2022 and December 31, 2021, substantially all of the assets held in the Trust Account were held in money market funds which
are invested primarily in U.S. Treasury securities. Interest income is recognized when earned. The Company’s portfolio of marketable
securities is comprised solely of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company
Act, with a maturity of 185 days or less or in money market funds selected by the Company meeting the conditions of paragraphs (d)(2),
(d)(3), (d)(4) and (d)(5) of Rule 2a-7 of the Investment Company Act, which invest only in U.S. government securities. Upon the closing
of the Initial Public Offering and the Private Placement, $
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 $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities which qualify as financial instruments under the FASB ASC Topic 820, “Fair Value Measurements,” equals or approximates the carrying amounts represented in the condensed balance sheets.
8
FTAC PARNASSUS ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers consist of:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
Derivative Warrant Liabilities
The Company does 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, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The Public Warrants and the Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, 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 Initial Public Offering were estimated using a binomial lattice model in a risk-neutral framework. The fair value of the Public Warrants as of June 30, 2022 and December 31, 2021 were based on observable listed prices for such warrants. The fair value of the Private Placement Warrants as of June 30, 2022 and December 31, 2021 were determined using a Black-Scholes option pricing model. The determination of the fair value of the warrant liability may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering date that were directly related to the Initial Public Offering. Offering costs were allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with derivative warrant liabilities were expensed as incurred and presented as non-operating expenses in the unaudited condensed statements of operations. Offering costs associated with the Class A common stock issued were charged against the carrying value of the shares of Class A common stock upon the completion of the Initial Public Offering. The Company classifies deferred 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
The Company accounts for
its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480, “Distinguishing Liabilities
from Equity.” Class A common stock subject to mandatory redemption (if any) is classified as liability instruments and is measured
at fair value. Conditionally redeemable Class A common stock (including Class A common stock that features redemption rights that are
within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s
control) is classified as temporary equity. At all other times, Class A common stock is classified as stockholders’ equity. As part
of the Private Placement, the Company issued
9
FTAC PARNASSUS ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Effective with the closing of the Initial Public Offering and the over-allotment option, 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.
Net Income Per Common Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net income per common share is calculated by dividing net income by the weighted average shares of common stock outstanding for the respective period.
The calculation of diluted
net income per common share does not consider the effect of the warrants underlying the Units sold in the Initial Public Offering (including
the consummation of the over-allotment) and the private placement warrants to purchase an aggregate of
The table below presents a reconciliation of the numerator and denominator used to compute basic and diluted net income per share for each class of common stock:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 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: | ||||||||||||||||||||||||||||||||
| Allocation of net income | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Denominator: | ||||||||||||||||||||||||||||||||
| Basic and diluted weighted average shares outstanding | ||||||||||||||||||||||||||||||||
| Basic and diluted net income per common share | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
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 June
30, 2022 and December 31, 2021, the Company’s deferred tax asset had a full valuation allowance recorded against it. Our 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 period, 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 June 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.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying unaudited condensed financial statements.
10
FTAC PARNASSUS ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 3. INITIAL PUBLIC OFFERING
On March 16, 2021, the Company
consummated its Initial Public Offering of
Each Unit consists of one share of Class A common stock and one-fourth of one warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at an exercise price of $11.50 (see Note 8).
NOTE 4. RELATED PARTY TRANSACTIONS
Founder Shares
On December 28, 2020, the
Company issued an aggregate of
The Insiders and Millennium agreed not to transfer, assign or sell any of their Founder Shares (except to permitted transferees) until (i) with respect to 25% of such shares, upon consummation of the Company’s initial Business Combination, (ii) with respect to 25% of such shares, when the closing price of the Class A common stock exceeds $12.00 for any 20 trading days within a 30-trading day period following the consummation of a Business Combination, (iii) with respect to 25% of such shares, when the closing price of the Class A common stock exceeds $13.50 for any 20 trading days within a 30-trading day period following the consummation of a Business Combination, and (iv) with respect to 25% of such shares, when the closing price of the Class A common stock exceeds $17.00 for any 20 trading days within a 30-trading day period following the consummation of a Business Combination or earlier, in any case, if, following a Business Combination, the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the public stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Private Placement Units
Simultaneously with the closing
of the Initial Public Offering, the Company consummated the Private Placement of
Each Private Placement Unit
consists of one share of Class A common stock and one-fourth of one warrant (the “Private Placement Warrant”). Each whole
Private Placement Warrant is exercisable for one share of Class A common stock at a price of $
Promissory Note
On January 15, 2021, the
Sponsor agreed to loan the Company an aggregate of up to $
11
FTAC PARNASSUS ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Working Capital Loans
If needed to finance transaction
costs in connection with searching for a target business or consummating an intended initial Business Combination, the Sponsor, officers,
directors or their affiliates may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”).
In the event that the initial Business Combination does not close, the Company may use a portion of the working capital held outside the
Trust Account to repay such loaned amounts, but no proceeds from the Trust Account would be used for such repayment. Such loans would
be evidenced by promissory notes. The notes would be paid upon consummation of the initial Business Combination, without interest, or,
at the lenders’ discretion, up to $
Administrative Support Agreement
Commencing on the date that
the Company’s securities were first listed on Nasdaq through the earlier of the Company’s consummation of a Business Combination
and its liquidation, the Company agreed to pay the Sponsor or an affiliate of the Sponsor $
NOTE 5. COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the Founder Shares, Private Placement Units (including securities contained therein) and the units 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 or the warrants issued as part of the units upon conversion of the Working Capital Loans) were entitled to registration rights pursuant to a registration rights agreement signed upon the effective date of 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 a majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities for sale under the Securities Act. In addition, the holders will have “piggy-back” registration rights to include such securities in other registration statements filed by the Company and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company would not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriter was entitled
to a cash underwriting discount of
NOTE 6. CLASS A COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION
The Company’s Class
A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to the
occurrence of future events. The Company is authorized to issue
The Class A common stock subject to possible redemption reflected on the condensed balance sheets is reconciled in the following table:
| Gross proceeds from Initial Public Offering | $ | |||
| Less: | ||||
| Fair value of Public Warrants at issuance | ( | ) | ||
| Offering costs allocated to Class A common stock subject to possible redemption | ( | ) | ||
| Plus: | ||||
| Accretion of Class A common stock subject to possible redemption amount | ||||
| Class A common stock subject to possible redemption, December 31, 2021 | $ | |||
| Plus: | ||||
| Accretion of Class A common stock subject to possible redemption amount | ||||
| Class A common stock subject to possible redemption, June 30, 2022 | $ |
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FTAC PARNASSUS ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 7. STOCKHOLDERS’ DEFICIT
Preferred Stock
— The Company is authorized to issue
Class A Common
Stock — The Company is authorized to issue
Class B Common
Stock — The Company is authorized to issue
Holders of Class B common stock will vote on the election of directors prior to the consummation of a Business Combination. 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 stockholders, except as described below or as required by law.
The shares of Class B common
stock will automatically convert into shares of Class A common stock at the time of a Business Combination on a one-for-one basis, subject
to adjustment. In the case that additional shares of Class A common stock or equity-linked securities are issued or deemed issued in excess
of the amounts offered in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which shares
of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding
shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number
of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted
basis,
NOTE 8. WARRANTS
As of June 30, 2022 and December
31, 2021, the Company had
Public Warrants may only
be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants
will become exercisable 30 days after the completion of a Business Combination. The Public Warrants will expire
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise for cash 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, 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 from the registration or qualifications requirements of the securities laws of the state of residence of the registered holder of the warrants. Notwithstanding the foregoing, if a registration statement covering the shares of Class A common stock issuable upon exercise of the Public Warrants has not been declared effective by the end of 60 business days following the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act.
The Company agreed that as soon as practicable, but in no event later than 20 business days after the closing of a Business Combination, the Company will use its best efforts to file with the SEC, and within 60 business days following a Business Combination to have declared effective, a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. The Company will use its best efforts 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. 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 it satisfies 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, the Company will not be required to file or maintain in effect a registration statement, but will be required to use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
13
FTAC PARNASSUS ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Once the warrants become exercisable, the Company may redeem the Public Warrants:
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If the Company calls the Public Warrants for redemption for cash, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. Additionally, in no event will the Company be required to net cash settle the warrants.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants are not transferable, assignable or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants are non-redeemable so long as they are held by the Sponsor, Millennium or their permitted transferees. If the Private Placement Warrants are held by someone other than the Sponsor, Millennium or their permitted transferees, the Private Placement Warrants will be exercisable by such holders on the same basis as the Public Warrants.
NOTE 9. FAIR VALUE MEASUREMENTS
The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
| June 30, 2022 | ||||||||||||
| Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
| Assets: | ||||||||||||
| Investments held in Trust Account - money market funds | $ | $ | $ | |||||||||
| Liabilities: | ||||||||||||
| Derivative warrant liabilities - Public warrants | $ | $ | $ | |||||||||
| Derivative warrant liabilities - Private placement warrants | $ | $ | $ | |||||||||
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FTAC PARNASSUS ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
| December 31, 2021 | ||||||||||||
| Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
| Assets: | ||||||||||||
| Investments held in Trust Account - money market funds | $ | $ | $ | |||||||||
| Liabilities: | ||||||||||||
| Derivative warrant liabilities - Public warrants | $ | $ | $ | |||||||||
| Derivative warrant liabilities - Private placement warrants | $ | $ | $ | |||||||||
Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. The estimated fair value of Public Warrants was transferred from a Level 3 fair value measurement to a Level 1 measurement, when the Public Warrants were separately listed and traded in May 2021. There were no other transfers to/from Levels 1, 2, and 3 during the year ended December 31, 2021. There were no transfers during the three and six months ended June 30, 2022.
Level 1 assets include investments in money market funds that invest solely in U.S. government securities. The Company uses inputs such as actual trade data, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.
For periods where no observable traded price is available, the fair value of the Public Warrants were estimated using a binomial lattice model and the Private Placement Warrants have been estimated using a Black-Scholes option pricing model. For periods subsequent to the detachment of the Public Warrants from the Units, the fair value of the Public Warrants is based on the observable listed price for such warrants. The estimated fair value of the Public and Private Placement Warrants, prior to the Public Warrants being traded in an active market, was determined using Level 3 inputs. Inherent in a binomial lattice model and Black-Scholes option pricing model are assumptions related to the Unit price, expected volatility, risk-free interest rate, term to expiration, and dividend yield. The Unit price is based on the publicly traded price of the Units as of the measurement date. The Company estimated the volatility for the Public and Private Placement Warrants based on the implied volatility from the traded prices of warrants issued by other special purpose acquisition companies. The risk-free interest rate is based on interpolated U.S. Treasury rates, commensurate with a similar term to the Public and Private Placement Warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. Finally, the Company does not anticipate paying a dividend. Any changes in these assumptions can change the valuation significantly.
The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:
| June 30, 2022 | December 31, 2021 | |||||||
| Exercise price | $ | $ | ||||||
| Stock price | $ | $ | ||||||
| Volatility | % | % | ||||||
| Term (years) | ||||||||
| Risk-free rate | % | % | ||||||
| Dividend yield | % | % | ||||||
The change in the fair value of the derivative warrant liabilities, measured using Level 3 inputs, for the three and six months ended June 30, 2022 is summarized as follows:
| Derivative warrant liabilities at January 1, 2022 | $ | |||
| Change in fair value of derivative warrant liabilities | ( | ) | ||
| Derivative warrant liabilities at March 31, 2022 (Level 3) | ||||
| Change in fair value of derivative warrant liabilities | ( | ) | ||
| Derivative warrant liabilities at June 30, 2022 (Level 3) | $ |
The change in the fair value of the derivative warrant liabilities, measured using Level 3 inputs, for the three and six months ended June 30, 2021 is summarized as follows:
| Derivative warrant liabilities at beginning of period | $ | |||
| Issuance of Public Warrants | ||||
| Issuance of Private Placement Warrants | ||||
| Change in fair value of derivative warrant liabilities | ( | ) | ||
| Derivative warrant liabilities at March 31, 2021 (Level 3) | ||||
| Transfer of Public Warrants to Level 1 | ( | ) | ||
| Change in fair value of derivative warrant liabilities | ( | ) | ||
| Derivative warrant liabilities at June 30, 2021 (Level 3) | $ |
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the condensed balance sheet date up to the date that the condensed financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.
15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “FTAC Parnassus Acquisition Corp.,” “FTAC Parnassus,” “our,” “us” or “we” refer to FTAC Parnassus Acquisition Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited interim condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
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. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.
Overview
We are a blank check company incorporated in Delaware on December 18, 2020. We were formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more target businesses (the “Business Combination”). We intend to effectuate our business combination using cash from the proceeds of our initial public offering and the sale of the placement units that occurred simultaneously with the completion of our initial public offering, our capital stock, debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
Results of Operations
We have neither engaged in any operations (other than searching for a Business Combination after the Initial Public Offering) nor generated any revenues to date. Our only activities from inception through June 30, 2022 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and, after the 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 Business Combination, at the earliest. We expect to generate non-operating income in the form of interest income on marketable securities 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 for due diligence expenses.
For the three months ended June 30, 2022, we had net income of $1,038,350, which consisted of a $1,157,775 non-operating gain resulting from the change in fair value of derivative warrant liabilities and $317,448 of income from investments held in Trust Account, offset by provision for income taxes of $39,025 and $397,848 in general and administrative expenses.
For the six months ended June 30, 2022, we had net income of $5,738,789, which consisted of a $6,170,375 non-operating gain resulting from the change in fair value of derivative warrant liabilities and $339,736 of income from investments held in Trust Account, offset by provision for income taxes of $39,025 and $732,297 in general and administrative expenses.
For the three months ended June 30, 2021, we had net income of $1,023,319, which consisted of a $1,392,250 non-operating gain resulting from the change in fair value of derivative warrant liabilities and $6,233 of income from investments held in Trust Account, offset by approximately $375,164 in general and administrative expenses.
For the six months ended June 30, 2021, we had net income of $728,104, which consisted of a $1,715,100 non-operating gain resulting from the change in fair value of derivative warrant liabilities and $7,261 of income from investments held in Trust Account, offset by approximately $471,957 in general and administrative expenses and $522,300 in offering costs associated with derivative warrant liabilities.
Liquidity and Capital Resources
Our liquidity needs prior to the Initial Public Offering were satisfied through a payment of $25,000 from the Sponsor to purchase the Founder Shares, the loan of approximately $67,000 from the Sponsor under the Note (as defined in Note 4 to the financial statements), and the proceeds from the consummation of the Private Placement not held in the Trust Account. We repaid the Note in full on March 16, 2021. Subsequent to the repayment, the facility was no longer available to us.
On March 16, 2021, we consummated the Initial Public Offering of 25,000,000 Units, which included the partial exercise by the underwriter of its over-allotment option in the amount of 3,000,000 Units, at a price of $10.00 per Unit, generating gross proceeds of $250,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 690,000 Placement Units at a price of $10.00 per Placement Unit in a private placement to our Sponsor and Millennium, generating gross proceeds of $6,900,000.
Following the Initial Public Offering, the partial exercise of the over-allotment option, and the sale of the Placement Units, a total of $250,000,000 was placed in the Trust Account and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less, or in money market funds meeting certain conditions under Rule 2a-7 of the Investment Company Act and that invest only in direct U.S. government obligations. We incurred $15,527,366 in transaction costs, including $4,400,000 of underwriting fees, $10,600,000 of deferred underwriting fees and $527,366 of other offering costs.
16
For the six months ended June 30, 2022, cash used in operating activities was $838,641. Net income of $5,738,789 was affected by interest earned on marketable securities held in the Trust Account of $339,736 and change in fair value of warrant liabilities of $6,170,375. Changes in operating assets and liabilities used $67,319 of cash for operating activities.
For the six months ended June 30, 2021, cash used in operating activities was $795,242. Net income of $728,104 was affected by interest earned on marketable securities held in the Trust Account of $7,261, change in fair value of warrant liabilities of $1,715,100, transaction costs attributable to warrant liabilities of $522,300, and general and administrative expenses paid under the promissory note of $875. Changes in operating assets and liabilities used $324,160 of cash for operating activities.
As of June 30, 2022, we had cash, investments and marketable securities held in the Trust Account of $250,164,448 (including $164,448 of interest, net of withdrawals). We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account to complete our Business Combination. We may withdraw interest to pay taxes. During the three and six months ended June 30, 2022, we withdrew an amount of $195,153 in the interest income from the Trust Account to pay franchise and income taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
Going Concern
We have until March 16, 2023 to consummate a Business Combination. It is uncertain that we will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution. Management has determined that the mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution raises substantial doubt about our ability to continue as a going concern. Management intends to complete a Business Combination prior to March 16, 2023. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after March 16, 2023.
As of June 30, 2022, we had $167,517 of cash held outside of 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 finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor, or certain of our directors and officers may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts, but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into units, at a price of $10.00 per unit, at the option of the lender. The units would be identical to the Placement Units. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our Sponsor or an affiliate of our Sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account. As of June 30, 2022, no such loans were outstanding.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. 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 our public shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such 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 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.
Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on our financial position, results of our operations and/or search for a target company, the specific impact is not readily determinable as of the date of the condensed financial statements. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
17
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of June 30, 2022. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of the Sponsor a monthly fee of $20,000 for office space, administrative and shared personnel support services to the Company. We began incurring these fees on March 12, 2021 and will continue to incur these fees monthly until the earlier of the completion of the business combination and our liquidation. On June 8, 2021, the administrative services agreement was amended and restated to increase the monthly charge payable from $20,000 to $27,500. For the three and six months ended June 30, 2022, we incurred and paid expenses of $82,500 and $165,000 under this agreement, respectively. For the three and six months ended June 30, 2021, we incurred and paid expenses of $60,000 and $80,000 under this agreement, respectively. As of June 30, 2022 and December 31, 2021, we did not have a balance outstanding for services in connection with such agreement in the accompanying condensed balance sheets.
In addition, we have an agreement to pay the underwriter a deferred fee of $10,600,000. The deferred fee will become payable to the representative of the underwriter from the amounts held in the Trust Account solely in the event that we complete a business combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”), and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The Public Warrants and the Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the carrying value of the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised. The initial fair value of the Public Warrants issued in connection with the Initial Public Offering were estimated using a binomial lattice model in a risk-neutral framework. The fair value of the Public Warrants as of June 30, 2022 is based on observable listed prices for such warrants. The fair value of the Placement Warrants as of June 30, 2022 is determined using a Black-Scholes option pricing model. The determination of the fair value of the warrant liability may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
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Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480, “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) is classified as liability instruments and is measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that features redemption rights that are within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, Class A common stock is classified as stockholders’ equity. As part of the Private Placement, the Company issued 690,000 shares of Class A common stock (“Placement Shares”). These Placement Shares will not be transferable, assignable or salable until 30 days after the completion of our initial business combination, as such are considered non-redeemable and presented as permanent equity in the Company’s condensed balance sheets. Excluding the Placement Shares, our Class A common stock features certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, as of the Initial Public Offering, 25,000,000 shares of Class A common stock subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders’ equity section of our condensed balance sheets.
Effective with the closing of the Initial Public Offering and the over-allotment option, 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 (see Note 2).
Net Income per Common Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” We have two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net income per common share is calculated by dividing net income by the weighted average shares of common stock outstanding for the respective period.
The calculation of diluted net income per share does not consider the effect of the warrants underlying the Units sold in the Initial Public Offering (including the consummation of the over-allotment) and the placement warrants to purchase an aggregate of 6,422,500 shares of Class A common stock, because their exercise is contingent upon future events and their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net income per share is the same as basic net income per share for the three and six months ended June 30, 2022. Accretion associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, “Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.
We do not believe that any other recently issued, but not yet effective, accounting standards updates, if currently adopted, would have a material effect on the Company’s condensed financial statements.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide the information required by this Item.
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 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 as of June 30, 2022. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13 a-15(e) and 15d-15(e) under the Exchange Act) were effective.
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 June 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
None.
Item 1A. Risk Factors
As of the date of this Quarterly Report on Form 10-Q, other than as set forth below, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on March 17, 2022. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Changes in laws or regulations or how such laws or regulations are interpreted or applied, or a failure to comply with any laws or regulations, may adversely affect our business, including our ability to negotiate and complete our initial business combination, and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments. We will be required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete our initial business combination and results of operations.
On March 30, 2022, the SEC issued proposed rules relating to, among other items, disclosures in business combination transactions involving SPACs (defined below) and private operating companies; the financial statement requirements applicable to transactions involving shell companies; the use of projections in SEC filings in connection with proposed business combination transactions; the potential liability of certain participants in proposed business combination transactions; and the extent to which special purpose acquisition companies (“SPACs”) could become subject to regulation under the Investment Company Act, including a proposed rule that would provide SPACs a safe harbor from treatment as an investment company if they satisfy certain conditions that limit a SPAC’s duration, asset composition, business purpose and activities. These rules, if adopted, whether in the form proposed or in a revised form, may increase the costs of and the time needed to negotiate and complete an initial business combination, and may constrain the circumstances under which we could complete an initial business combination.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On March 16, 2021, we consummated our Initial Public Offering of 25,000,000 Units, including the issuance of 3,000,000 additional Units as a result of the underwriter’s partial exercise of its over-allotment option at $10.00 per Unit, generating gross proceeds of $250.0 million, and incurring offering costs of approximately $15.5 million. Cantor Fitzgerald & Co. acted as sole book running manager of the offering. The securities sold in the offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333-252821). The SEC declared the registration statement effective on March 11, 2021.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of 690,000 Private Placement Units, at a price of $10.00 per Private Placement Unit, generating gross proceeds of $6.9 million. The Private Placement Units were purchased by Millennium (345,000 Units) and one of the Company’s Sponsors, FTAC Parnassus Sponsor, LLC (345,000 Units). Such securities were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
In connection with the Initial Public Offering, our Sponsor agreed to loan us an aggregate of up to $300,000 pursuant to the Note. This loan was non-interest bearing and payable on the consummation of the Initial Public Offering. As of June 30, 2022, the loan balance was $0.
Of the gross proceeds received from the Initial Public Offering, the partial exercise of the option to purchase additional Units and the Private Placement, $250,000,000 was placed in the Trust Account. These proceeds are invested in U.S. government treasury bills 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.
We paid a total of approximately $4.4 million in underwriting discounts and commissions related to the Initial Public Offering. In addition, the underwriter agreed to defer $10.6 million in underwriting discounts and commissions.
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Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Not applicable
Item 6. Exhibits.
| (1) | 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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SIGNATURE
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 hereunto duly authorized.
| Dated: August 11, 2022 | FTAC PARNASSUS ACQUISITION CORP. | |
| By: | /s/ Ryan M. Gilbert | |
| Name: | Ryan M. Gilbert | |
| Title: | Chief Executive Officer | |
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