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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-K
 
 
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from 
                    
to 
                    
Commission file number: 001-39853
 
 
Epiphany Technology Acquisition Corp.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
  
85-3227900
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
630 Ramona Street
Palo Alto, CA
  
94301
(Address of principal executive offices)
  
(Zip Code)
Registrant’s telephone number, including area code: (619) 736-6855
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 and one-third of one Redeemable Warrant
  
EPHYU
  
The NASDAQ Stock Market LLC
Class A Common Stock, par value $0.0001 per share
  
EPHY
  
The NASDAQ Stock Market LLC
Warrants, each exercisable for one share Class A Common Stock for $11.50 per share
  
EPHYW
  
The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
 
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes  ☐    No  ☒
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.    Yes  ☒    No  ☐
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 and post such files).    Yes  ☒    No  ☐
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 definition 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   ☐
Non-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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☒    No  ☐
The aggregate market value of the Class A common stock outstanding, other than shares held by persons who may be deemed affiliates of the registrant, computed by reference to the closing price for the Class A common stock on June 30, 2021, as reported on the Nasdaq Stock Market was $395,038,000.
As of March
30
, 2022, there were 41,050,000 shares of Class A common stock, par value $0.0001 per share and 10,062,500 shares of the Company’s Class B common stock, par value $0.0001 per share, of the registrant issued and outstanding.
 
 
 
TABLE OF CONTENTS
 
    
PAGE
  
Item 1.
   Business      1  
Item 1A.
   Risk Factors      19  
Item 1B.
   Unresolved Staff Comments      20  
Item 2.
   Properties      20  
Item 3.
   Legal Proceedings      20  
Item 4.
   Mine Safety Disclosures      20  
    
Item 5.
   Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities      21  
Item 6.
   Reserved      21  
Item 7.
   Management’s Discussion and Analysis of Financial Condition and Results of Operations      21  
Item 7A.
   Quantitative and Qualitative Disclosures About Market Risk      25  
Item 8.
   Financial Statements and Supplementary Data      25  
Item 9.
   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure      25  
Item 9A.
   Controls and Procedure      25  
Item 9B.
   Other Information      26  
Item 9C.
   Disclosure Regarding Foreign Jurisdictions that Prevent Inspections      26  
    
Item 10.
   Directors, Executive Officers and Corporate Governance      27  
Item 11.
   Executive Compensation      33  
Item 12.
   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters      34  
Item 13.
   Certain Relationships and Related Transactions, and Director Independence      35  
Item 14.
   Principal Accountant Fees and Services      37  
    
Item 15.
   Exhibit and Financial Statement Schedules      39  
Item 16.
   Form 10-K Summary      39  
 
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report (as defined below), including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking statements within the meaning of Section 27A of the Securities Act (as defined below) and Section 21E of the Exchange Act (as defined below). These forward-looking statements can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,” “will,” “potential,” “projects,” “predicts,” “continue,” or “should,” or, in each case, their negative or other variations or comparable terminology. There can be no assurance that actual results will not materially differ from expectations. Such statements include, but are not limited to, any statements relating to our ability to consummate any acquisition or other business combination and any other statements that are not statements of current or historical facts. These statements are based on management’s current expectations, but actual results may differ materially due to various factors, including, but not limited to:
 
  •  
our ability to complete our initial business combination;
 
  •  
our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination;
 
  •  
our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination, as a result of which they would then receive expense reimbursements;
 
  •  
our potential ability to obtain additional financing to complete our initial business combination;
 
  •  
the ability of our officers and directors to generate a number of potential acquisition opportunities;
 
  •  
our pool of prospective target businesses;
 
  •  
the ability of our officers and directors to generate a number of potential acquisition opportunities;
 
  •  
our public securities’ potential liquidity and trading;
 
  •  
the lack of a market for our securities;
 
  •  
the use of proceeds not held in the trust account or available to us from interest income on the trust account balance; or
 
  •  
our financial performance.
The forward-looking statements contained in this Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
Unless otherwise stated in this Report, or the context otherwise requires, references to:
 
  •  
“board of directors” or “board” are to the board of directors of the Company;
 
  •  
“Cantor” are to Cantor Fitzgerald & Co., the representative of the underwriters in our initial public offering;
 
  •  
“Class A common stock” are to the shares of Class A common stock of the Company, par value $0.0001 per share;
 
  •  
“Class B common stock” are to the shares of Class B common stock of the Company, par value $0.0001 per share;
 
ii
  •  
“common stock” are to our Class A common stock and our Class B common stock, collectively;
 
  •  
“Continental” are to Continental Stock Transfer & Trust Company, trustee of our trust account (as defined below) and warrant agent of our public warrants (as defined below);
 
  •  
“DGCL” are to the Delaware General Corporation Law;
 
  •  
“DWAC System” are to the Depository Trust Company’s Deposit/Withdrawal At Custodian System;
 
  •  
“Exchange Act” are to the Securities Exchange Act of 1934, as amended;
 
  •  
“FINRA” are to the Financial Industry Regulatory Authority;
 
  •  
“founder shares” are to shares of our Class B common stock initially purchased by our sponsor in a private placement prior to our initial public offering, and the shares of our Class A common stock issuable upon the conversion thereof;
 
  •  
“GAAP” are to the accounting principles generally accepted in the United States of America;
 
  •  
“IFRS” are to the International Financial Reporting Standards, as issued by the International Accounting Standards Board;
 
  •  
“initial business combination” are to a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses;
 
  •  
“initial public offering” are to the initial public offering that was consummated by the Company on January 12, 2021;
 
  •  
“initial stockholders” are to our sponsor and any other holders of our founder shares prior to our initial public offering (or their permitted transferees);
 
  •  
“Investment Company Act” are to the Investment Company Act of 1940, as amended;
 
  •  
“JOBS Act” are to the Jumpstart Our Business Startups Act of 2012;
 
  •  
“management” or our “management team” are to our officers and directors;
 
  •  
“NASDAQ” are to the NASDAQ Stock Market;
 
  •  
“PCAOB” are to the Public Company Accounting Oversight Board (United States);
 
  •  
“placement units” are to the units being purchased by our sponsor and Cantor in the private placement, each placement unit consisting of one placement share and one-third of one placement warrant;
 
  •  
“placement shares” are to the shares of our common stock included within the placement units being purchased by our sponsor and Cantor in the private placement;
 
  •  
“public units” are to the units sold in our initial public offering, which consist of one public share and one-third of one public warrant;
 
  •  
“placement warrants” are to the warrants included within the placement units being purchased by our sponsor and Cantor in the private placement;
 
  •  
“private placement” are to the private placement of 800,000 placement units at a price of $10.00 per unit, for an aggregate purchase price of $8,000,000, which occurred simultaneously with the completion of our initial public offering, 450,000 of which were purchased by our sponsor and 350,000 of which were purchased by Cantor;
 
  •  
“public shares” are to shares of our Class A common stock sold as part of the units in our initial public offering (whether they are purchased in our initial public offering or thereafter in the open market);
 
iii
  •  
“public stockholders” are to the holders of our public shares, including our initial stockholders and management team to the extent our initial stockholders and/or members of our management team purchased public shares, provided that each initial stockholders’ and member of our management team’s status as a “public stockholder” shall only exist with respect to such public shares;
 
  •  
“public warrants” are to our redeemable warrants sold as part of the units in our initial public offering (whether they were purchased in our initial public offering or thereafter in the open market, including warrants that were acquired by our sponsor or its affiliates in our initial public offering or thereafter in the open market) and to any placement warrants sold as part of the placement units or warrants issued upon conversion of working capital loans in each case that are sold to third parties that are not initial purchasers or executive officers or directors (or permitted transferees) following the consummation of our initial business combination;
 
  •  
“Registration Statement” are to the Form S-1 filed with the SEC on December 15, 2020, as amended;
 
  •  
“Report” are to this Annual Report on Form 10-K for the fiscal year ended December 31, 2021;
 
  •  
“Sarbanes-Oxley Act” are to the Sarbanes-Oxley Act of 2002;
 
  •  
“SEC” are to the U.S. Securities and Exchange Commission;
 
  •  
“Securities Act” are to the Securities Act of 1933, as amended;
 
  •  
“sponsor” are to Epiphany Technology Sponsor LLC, a Delaware limited liability company;
 
  •  
“trust account” are to the trust account in which an amount of $402,500,000 ($10.00 per unit) from the net proceeds of the sale of the units in the initial public offering and the private units were placed following the closing of the initial public offering;
 
  •  
“units” are to both public units and private units;
 
  •  
“warrants” are to our redeemable warrants, which include the public warrants as well as the placement warrants and any warrants issued upon conversion of working capital loans to the extent they are no longer held by the initial holders or their permitted transferees;
 
  •  
“we,” “us,” “Company” or “our Company” are to Epiphany Technology Acquisition Corp.; and
 
  •  
“Withum” are to WithumSmith+Brown, PC, our independent registered public accounting firm.
 
iv
PART I
 
Item 1.
Business.
Our Company
We are a blank check company formed as a Delaware corporation for the purpose of effecting an initial business combination. Since our initial public offering, we have focused our search for an initial business combination on businesses within the technology industry. Our efforts to identify a prospective target business are not limited to a particular industry or geographic region, although we are focusing on targets in an industry where we believe our management team’s and founders’ expertise provide us with a competitive advantage, including the technology industry.
Initial Public Offering
On January 12, 2021, we consummated our initial public offering of 40,250,000 public units. Each unit consists of one share of Class A common stock of the Company, par value $0.0001 per share, and
one-third
redeemable warrant of the Company, with each warrant entitling the holder thereof to purchase one share of Class A common stock for $11.50 per whole share. The public units were sold at a price of $10.00 per unit, generating gross proceeds to the Company of $402,500,000.
Simultaneously with the closing of the initial public offering, we completed the private sale of an aggregate of 800,000 placement units (450,000 of which were sold to our sponsor and 350,000 of which were sold to Cantor), at a purchase price of $10.00 per placement unit, generating gross proceeds of $8,000,000.
A total of $402,500,000, comprised of $394,500,000 of the proceeds from the initial public offering and $8,000,000 of the proceeds of the sale of the placement units was placed in the trust account maintained by Continental, acting as trustee.
It is the job of our sponsor and management team to complete our initial business combination. Our management team is led by Arthur Coviello, our Chairman of the Board, Paul Deninger, our Vice Chairman of the Board, and Peter Bell, our Chief Executive Officer, Chief Financial Officer and Director, who have many years of experience in growing and operating technology companies and in acquiring and integrating companies. We must complete our initial business combination by January 12, 2023, 24 months from the closing of our initial public offering. If our initial business combination is not consummated by January 12, 2023, then our existence will terminate, and we will distribute all amounts in the trust account.
The Technology Makeover
Our management team believes a wide range of technological breakthroughs led by the transformative effects of innovations in cloud computing, artificial intelligence, cybersecurity and data analytics have accelerated the cycles of change, radically impacting industries and business models across the world. We believe that all industries within the global economy will need to accept and embrace the entrance into the digital economy, as technology will impact all aspects of a company’s operations.
Our management team believes that the
COVID-19 pandemic
has only accelerated the aforementioned trend and is a catalyst for the digital migration at a speed and on a scale never seen before. Individuals as well as small and large institutions alike have been forced to adapt to a new normal of living in a world where physical contact has been hindered and technology has become essential for both personal and business activities on a daily basis. A number of technology companies such as Amazon, Zoom, and CrowdStrike are clear winners from this pandemic, having already reshaped their respective industries, and are using the current opportunity to continue to scale to become engrained in the day to day necessity for all individuals and institutions.
Amidst the technological innovations and the continued digitization of the economy, we believe legacy business models that fail to adapt will eventually cease to exist while innovators that take advantage of the current situation will be awarded outsized opportunities to lead the upcoming changes. Major shifts are happening in the financial, media and retail sectors, as well as in interpersonal communication, transportation, and education sectors. We believe the market rewards those who see and understand its trajectory and does not wait for laggards.
 
1
This confluence of enormous change and plentiful capital has created what we believe is a sizeable opportunity for wealth building, especially as private companies enter the public markets to fuel their next phase of growth. Our management team believes that there is demand from public market investors to locate and invest in a high growth technology company, debut it in the public markets and partner with it, as shareholders and mentors, to help the company elevate itself into the next multi-billion dollar market cap company.
The Opportunity
Our management team believes that a growing number of new companies have attracted more private capital, but once they flourish, they have a narrower exit route. As technology continues to innovate and push the boundaries of how the innovation trickles down through society, our management team fundamentally believes that special purpose acquisition companies (“SPACs”) are transforming the capital markets and chartering a new path for private technology companies to go public. Furthermore, we believe the SPAC process provides institutional investors with an unrivaled ability to better understand the business model and future business prospects of the target company, providing the investors more conviction in the investment opportunity. We believe the combination of speed to market, price certainty, upfront liquidity to existing stockholders and the mentorship from our management presents a compelling reason for a private technology company to pursue a merger with us.
We believe that the current
COVID-19 pandemic
has only accelerated the digitization of the global economy. For this reason, our management team believes the need for these private companies to enter the public markets sooner rather than later has increased. Going public provides the company with a liquid currency for M&A opportunities, employee equity program for talent recruiting and retention and proper corporate mentorship and, potentially, governance from experienced former public company executives. We believe this current market dynamic creates a constructive opportunity for our management team to explore an initial business combination with a target and help drive long-term return for all stockholders by leveraging our management team’s operational and financial experience.
Management Team
We believe our management team is well positioned to identify and evaluate businesses within the technology industry that would best benefit from our operational skillset, diverse and expansive network to usher the company into the public markets. Our management team has a demonstrated track record of executing and integrating successful M&A and has 100+ years of collective experience in building and nurturing technology companies both as operators, investors and advisors. The members of our team have been technology industry participants since the early days of industries such as cybersecurity and cloud computing. They have seen numerous platform shifts and guided public companies through the inevitable turbulence the technology industry both benefits and suffers from. Their collective focus within the technology sector has led to the creation of some of the most scaled and valuable players in the market. We believe that our management team’s historical track record of growing and operating public technology companies and experience in acquiring and integrating companies will create a compelling partnership with a target in an initial business combination. Our team comprises the following:
Past performance of our management team and advisors is not a guarantee either (i) that we will be able to identify a suitable candidate for our initial business combination or (ii) of success with respect to any business combination we may consummate. You should not rely on the historical performance record of our management team or advisors as indicative of our future performance. Additionally, in the course of their respective careers, members of our management team have been involved in businesses and deals that were unsuccessful. Some of our officers, directors and advisors have not had experience with blank check companies or special purpose acquisition companies in the past. In addition, our executive officers, directors, and advisors may have conflicts of interest with other entities to which they owe fiduciary or contractual obligations with respect to initial business combination opportunities.
Our Mission
Our management team’s goal is to leverage its deep and proprietary network to identify and complete a business combination with a high-growth technology company with an enterprise value of greater than $1 billion. We seek to bring synergistic benefits to the acquired company by leveraging our management’s domain expertise, proven track record in value creation for shareholders, and deep personal and professional networks to help the company grow organically or via M&A.
 
2
The benefits we offer to a target company encompass, but are not limited to the following:
 
  •  
Expertise in growing successful technology companies:
 Our management team has demonstrated a strong track record of building, investing, nurturing, and leading disruptive technology companies. We believe that we can spot unique ideas and disruptive business models and grow them from local sensation to global ubiquity. We believe we can also leverage our professional network to recruit top talent and use that intellectual capital to help the company achieve great competitive advantages.
 
  •  
Ability to mentor and support exceptional executives:
 Our Chairman, Vice Chairman, Chief Executive Officer, directors, and advisors have collectively served on more than 70 public and private boards, both within and outside the technology sector. They have overseen acquisitions, driven global growth, improved operations, and navigated complex governance challenges while on these boards. Our management team will bring the experience cultivated to help guide the company in its entrance into the public markets.
 
  •  
Maximizing the value of becoming a publicly traded company:
 As a public company, there are numerous benefits we offer to the stakeholders. These include, but are not limited to, (i) greater liquid equity for the company’s growth and accretive acquisitions, (ii) more visibility and stronger branding among the company’s customers, (iii) improved access to debt and equity capital markets, and (iv) more tangible incentives for employee stock compensation, which play a key role in attracting and retaining top talent in the technology industry.
Acquisition Criteria
We are proactively and aggressively searching for potential business combination candidates using the relationships of our management team and advisors with technology company executives, venture capitalists and private equity firms. We believe this direct sourcing method allows us to identify actionable business combination opportunities efficiently and effectively.
We have identified the following criteria that serve as guidelines for evaluating acquisition opportunities, which we apply and will apply during our search. All are indicators of compelling growth potential. The attributes we most strongly seek include the following:
 
  •  
Industry:
 We focus on the technology industry, where we have deep and sustained knowledge and expertise. We believe our management team’s extensive experience within technology enables us to identify and evaluate a potential target quickly in order to secure favorable terms, as well as plan post-transaction operational improvements;
 
  •  
Size:
 We focus on companies with proven business models, sufficient trading liquidity post-closing of initial business combination and long-term risk adjusted return potential;
 
  •  
Market opportunity:
 We intend to select an investment in industry segments that have strong long-term growth prospects and significant overall size and potential;
 
  •  
Growth over near-term
 profitability
: We intend to invest in a company with promising substantial room for growth but possesses strong unit economics driven by sustainable competitive advantages;
 
  •  
Strong management:
 We seek companies with strong management team already in place. We have spent and will spend significant time assessing a company’s leadership and culture, and maximizing its efficiency over time;
 
  •  
Opportunity for operational improvement:
 We seek companies that would also benefit from the infusion of our management skills and experience. This mentoring will drive improvements in the company’s processes, as well as its
go-to-market and
overall execution strategy;
 
  •  
Will benefit from being public:
 We seek companies that can inherently benefit from a public listing. These inherent benefits include acquisition currency, greater visibility and branding among customers, enhanced access to debt and equity capital markets, and more tangible incentives for employee stock compensation;
 
  •  
Developed regulatory processes:
 We focus on companies that have adequate processes and could readily operate in the public markets with strong governance, controls and reporting in place; and
 
  •  
Appropriate valuations:
 We believe we are a rigorous, criteria-based, disciplined, and valuation-centric investor. We intend to acquire a target on terms that we believe provide significant upside potential with limited risk.
 
3
These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our management team may deem relevant. In the event that we decide to enter into our initial business combination with a target business that only meets some but not all of the above criteria and guidelines, we will disclose that the target business does not meet the above criteria in our stockholder communications related to our initial business combination, which, as discussed in this Report, would be in the form of proxy solicitation materials or tender offer documents that we would file with the SEC.
We may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial business combination. We intend to acquire a company with an enterprise value significantly above the net proceeds of our initial public offering and the sale of the placement units. Depending on the size of the transaction or the number of public shares we become obligated to redeem, we may potentially utilize several additional financing sources, including but not limited to the issuance of additional securities to the sellers of a target business, debt issued by banks or other lenders or the owners of the target, a private placement to raise additional funds, or a combination of the foregoing.
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 initial business combination, if cash on hand is insufficient to meet our obligations or our working capital needs, we may need to obtain additional financing.
Initial Business Combination
Nasdaq rules require that we must complete one or more business combinations having an aggregate fair market value of at least 80% of the value of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. Our board of directors will make the determination as to the fair market value of our initial business combination. If our board of directors is not able to independently determine the fair market value of our initial business combination, we will obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions with respect to the satisfaction of such criteria. While we consider it unlikely that our board of directors will not be able to make an independent determination of the fair market value of our initial business combination, it may be unable to do so if it is less familiar or experienced with the business of a particular target or if there is a significant amount of uncertainty as to the value of a target’s assets or prospects. Additionally, pursuant to Nasdaq rules, any initial business combination must be approved by a majority of our independent directors.
We anticipate structuring our initial business combination either (i) in such a way so that the post-transaction company in which our public stockholders own shares will own or acquire 100% of the equity interests or assets of the target business or businesses, or (ii) in such a way so that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders, or for other reasons. However, we will only complete an initial business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the initial business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the initial business combination. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be taken into account for purposes of Nasdaq’s 80% fair market value test. If the initial business combination involves more than one target business, the 80% fair market value test will be based on the aggregate value of all of the transactions and we will treat the target businesses together as the initial business combination for purposes of a tender offer or for seeking stockholder approval, as applicable.
 
4
Our Business Combination Process
In evaluating prospective business combinations, we conduct a thorough due diligence review process that encompasses, among other things, a review of historical and projected financial and operating data, meetings with management and their advisors (if applicable),
in-depth assessment
of the management talent,
on-site inspection
of facilities and assets, discussion with customers and suppliers, assessment of the organization’s readiness for public company status, legal reviews and other reviews as we deem appropriate. We also seek to utilize the expertise of our management team in analyzing technology companies and evaluating operating projections, financial projections and determining the appropriate return expectations given the risk profile of the target business.
We are not prohibited from pursuing an initial business combination with a company that is affiliated with our sponsor, officers or directors. In the event we seek to complete our initial business combination with a company that is affiliated with our sponsor, officers or directors, we, or a committee of independent directors, will obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions that our initial business combination is fair to our company from a financial point of view.
Certain of our officers and directors presently have fiduciary or contractual obligations to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations to present the opportunity to such entity, he or she will honor his or her fiduciary or contractual obligations to present such opportunity to such entity. We believe, however, that the fiduciary duties or contractual obligations of our officers or directors will not materially affect our ability to complete our initial business combination. Our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation.
Members of our management team may become officers or directors of other SPACs even before we have entered into a definitive agreement regarding our initial business combination.
Our Management Team
Members of our management team are not obligated to devote any specific number of hours to our matters but they devote as much of their time as they, in the exercise of their respective business judgement, deem necessary to our affairs until we have completed our initial business combination. The amount of time that any member of our management team devote in any time period varies based on the stage of the business combination process we are in. We do not have an employment agreement with any member of our management team.
We believe our management team’s operating and transaction experience and relationships with companies provides us with a substantial number of potential business combination targets. Over the course of their careers, the members of our management team have developed a broad network of contacts and corporate relationships in the technology industry. This network has grown through the activities of our management team sourcing, acquiring and financing businesses, our management team’s relationships with sellers, financing sources and target management teams and the experience of our management team in executing transactions under varying economic and financial market conditions.
Status as a Public Company
We believe our structure will make us an attractive business combination partner to target businesses. As a public company, we offer a target business an alternative to the traditional initial public offering through a merger or other business combination with us. Following an initial business combination, we believe the target business would have greater access to capital and additional means of creating management incentives that are better aligned with stockholders’ interests than it would as a private company. A target business can further benefit by augmenting its profile among potential new customers and vendors and aid in attracting talented employees. In a business combination transaction with us, the owners of the target business may, for example, exchange their shares of stock in the target business for our shares of Class A common stock (or shares of a new holding company) or for a combination of our shares of Class A common stock and cash, allowing us to tailor the consideration to the specific needs of the sellers.
 
5
Although there are various costs and obligations associated with being a public company, we believe target businesses will find this method a more expeditious and cost-effective method to becoming a public company than the typical initial public offering. The typical initial public offering process takes a significantly longer period of time than the typical business combination transaction process, and there are significant expenses in the initial public offering process, including underwriting discounts and commissions, marketing and road show efforts that may not be present to the same extent in connection with an initial business combination with us.
Furthermore, once a proposed initial business combination is completed, the target business will have effectively become public, whereas an initial public offering is always subject to the underwriters’ ability to complete the offering, as well as general market conditions, which could delay or prevent the offering from occurring or could have negative valuation consequences. Following an initial business combination, we believe the target business would then have greater access to capital and an additional means of providing management incentives consistent with stockholders’ interests and the ability to use its shares as currency for acquisitions. Being a public company can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting talented employees.
While we believe that our structure and our management team’s backgrounds will make us an attractive business partner, some potential target businesses may view our status as a blank check company, such as our lack of an operating history and our ability to seek stockholder approval of any proposed initial business combination, negatively.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a
non-binding advisory
vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following January 12, 2026, the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A common stock that is held by
non-affiliates exceeds
$700 million as of the prior June 30
th
, and (2) the date on which we have issued more than $1.0 billion in
non-convertible debt
securities during the prior three-year period. References herein to emerging growth company will have the meaning associated with it in the JOBS Act.
Additionally, we are a “smaller reporting company” as defined in Rule 10(f)(1) of Regulation
S-K.
Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by
non-affiliates exceeds
$250 million as of the end of the prior June 30
th
, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held by
non-affiliates exceeds
$700 million as of the prior June 30
th
.
 
6
Financial Position
With funds available for an initial business combination in the amount of $402,613,586 (assuming no redemptions) as of December 31, 2021, which amount includes $15,137,500 of the underwriters’ deferred discount, we offer a target business a variety of options such as creating a liquidity event for its owners, providing capital for the potential growth and expansion of its operations or strengthening its balance sheet by reducing its debt or leverage ratio. Because we are able to complete our initial business combination using our cash, debt or equity securities, or a combination of the foregoing, we have the flexibility to use the most efficient combination that will allow us to tailor the consideration to be paid to the target business to fit its needs and desires. However, we have not taken any steps to secure third party financing and there can be no assurance it will be available to us.
Effecting Our Initial Business Combination
We are not presently engaged in, and we will not engage in, any operations other than the pursuit of our initial business combination, for an indefinite period of time. We intend to effectuate our initial business combination using cash from the proceeds of our initial public offering and the private placement of the placement units, the proceeds of the sale of our shares in connection with our initial business combination (pursuant to backstop agreements we may enter into following the consummation of our 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. We may seek to complete our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth, which would subject us to the numerous risks inherent in such companies and businesses.
If our initial business combination is paid for using equity or debt securities, or not all of the funds released from the trust account are used for payment of the consideration in connection with our initial business combination or used for redemptions of our Class A common stock, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance or expansion of operations of the post-transaction company, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital.
We may seek to raise additional funds through a private offering of debt or equity securities in connection with the completion of our initial business combination, and we may effectuate our initial business combination using the proceeds of such offering rather than using the amounts held in the trust account. In addition, we target businesses larger than we could acquire with the net proceeds of our initial public offering and the sale of the 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 expect to complete such financing only simultaneously with the completion of our initial business combination. In the case of an initial business combination funded with assets other than the trust account assets, our proxy materials or tender offer documents disclosing the initial business combination would disclose the terms of the financing and, only if required by law, we would seek stockholder approval of such financing. There are no prohibitions on our ability to raise funds privately, or through loans in connection with our initial business combination.
Sources of Target Businesses
Target business candidates may be brought to our attention from various unaffiliated sources, including investment bankers and investment professionals. Target businesses may also be brought to our attention by such unaffiliated sources as a result of being solicited by us by calls or mailings. These sources may also introduce us to target businesses in which they think we may be interested on an unsolicited basis, since many of these sources will have read the prospectus of our initial public offering and know what types of businesses we are targeting. Our officers and directors, as well as our sponsor and their affiliates, may also bring to our attention target business candidates that they become aware of through their business contacts as a result of formal or informal inquiries or discussions they may have, as well as attending trade shows or conventions. In addition, we expect to receive a number of proprietary deal flow opportunities that would not otherwise necessarily be available to us as a result of the business relationships of our officers and directors and our sponsor and their affiliates. We may engage these firms or other individuals in the future, in which event we may pay a finder’s fee, consulting fee, advisory fee or other compensation to be determined in an arm’s length negotiation based on the terms of the transaction. We will engage a finder only to the extent our management determines that the use of a finder may bring opportunities to us that may not otherwise be available to us or if finders approach us on an unsolicited basis with a potential transaction that our management determines is in our best interest to pursue. Payment of finder’s fees is customarily tied to completion of a transaction, in which case any such fee will be paid out of the funds held in the trust account. We may pay our sponsor or any of our existing officers or directors, or any entity with which they are affiliated, a finder’s fee, consulting fee or other compensation in connection with identifying, investigating and completing our initial business combination, which may be paid from the proceeds held in the trust account upon consummation of an initial business combination. We pay an affiliate of our sponsor a total of $15,000 per month for office space, utilities and secretarial and administrative support and to reimburse our sponsor for any
out-of-pocket expenses
related to identifying, investigating and completing an initial business combination.
 
7
Some of our officers and directors may enter into employment or consulting agreements with the post-transaction company following our initial business combination. The presence or absence of any such fees or arrangements will not be used as a criterion in our selection process of an initial business combination candidate.
We are not prohibited from pursuing an initial business combination with an initial business combination target that is affiliated with our sponsor, officers or directors or making the initial business combination through a joint venture or other form of shared ownership with our sponsor, officers or directors. In the event we seek to complete our initial business combination with an initial business combination target that is affiliated with our sponsor, officers or directors, we, or a committee of independent directors, would obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions that such an initial business combination is fair to our company from a financial point of view. We are not required to obtain such an opinion in any other context.
If any of our officers or directors become aware of an initial business combination opportunity that falls within the line of business of any entity to which he or she has
pre-existing fiduciary
or contractual obligations, he or she may be required to present such business combination opportunity to such entity prior to presenting such business combination opportunity to us. Our officers and directors currently have certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us.
Selection of a Target Business and Structuring of our Initial Business Combination
Nasdaq rules require that we must complete one or more business combinations having an aggregate fair market value of at least 80% of the value of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. The fair market value of our initial business combination will be determined by our board of directors based upon one or more standards generally accepted by the financial community, such as discounted cash flow valuation, a valuation based on trading multiples of comparable public businesses or a valuation based on the financial metrics of M&A transactions of comparable businesses. If our board of directors is not able to independently determine the fair market value of our initial business combination, we will obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions with respect to the satisfaction of such criteria. While we consider it unlikely that our board of directors will not be able to make an independent determination of the fair market value of our initial business combination, it may be unable to do so if it is less familiar or experienced with the business of a particular target or if there is a significant amount of uncertainty as to the value of a target’s assets or prospects. We do not intend to purchase multiple businesses in unrelated industries in conjunction with our initial business combination. Subject to this requirement, our management will have virtually unrestricted flexibility in identifying and selecting one or more prospective target businesses, although we will not be permitted to effectuate our initial business combination with another blank check company or a similar company with nominal operations.
In any case, we will only complete an initial business combination in which we own or acquire 50% or more of the outstanding voting securities of the target or otherwise acquire a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. If we own or acquire less than 100% of the equity interests or assets of a target business or businesses, the portion of such business or businesses that are owned or acquired by the post-transaction company is what will be taken into account for purposes of NASDAQ’s 80% fair market value test. There is no basis for our investors to evaluate the possible merits or risks of any target business with which we may ultimately complete our initial business combination.
To the extent we effect our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth we may be affected by numerous risks inherent in such company or business. Although our management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all significant risk factors.
 
8
In evaluating a prospective business target, we expect to conduct a thorough due diligence review, which may encompass, among other things, meetings with incumbent management and employees,
in-depth assessment
of the management talent, document reviews, interviews of customers and suppliers, inspection of facilities, assessment of the organization readiness for public company status, as well as a review of financial and other information that will be made available to us.
The time required to select and evaluate a target business and to structure and complete our initial business combination, and the costs associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target business with which our initial business combination is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete another business combination.
Lack of Business Diversification
For an indefinite period of time after the completion of our initial business combination, the prospects for our success may depend entirely on the future performance of a single business. Unlike other entities that have the resources to complete business combinations with multiple entities in one or several industries, it is probable that we will not have the resources to diversify our operations and mitigate the risks of being in a single line of business. In addition, we focus our search for an initial business combination in a single industry. By completing our initial business combination with only a single entity, our lack of diversification may:
 
  •  
subject us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact on the particular industry in which we operate after our initial business combination, and
 
  •  
cause us to depend on the marketing and sale of a single product or limited number of products or services.
Limited Ability to Evaluate the Target’s Management Team
Although we continue to closely scrutinize the management of a prospective target business when evaluating the desirability of effecting our initial business combination with that business, our assessment of the target business’ management may not prove to be correct. In addition, the future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of members of our management team, if any, in the target business cannot presently be stated with any certainty. The determination as to whether any of the members of our management team will remain with the combined company will be made at the time of our initial business combination. While it is possible that one or more of our directors will remain associated in some capacity with us following our initial business combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our initial business combination. Moreover, we cannot assure you that members of our management team will have significant experience or knowledge relating to the operations of the particular target business.
We cannot assure you that any of our key personnel will remain in senior management or advisory positions with the combined company. The determination as to whether any of our key personnel will remain with the combined company will be made at the time of our initial business combination.
Following an initial business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we will have the ability to recruit additional managers, or that additional managers will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.
Stockholders May Not Have the Ability to Approve Our Initial Business Combination
We may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC. However, we will seek stockholder approval if it is required by law or applicable stock exchange rule, or we may decide to seek stockholder approval for business or other legal reasons. Presented in the table below is a graphic explanation of the types of initial business combinations we may consider and whether stockholder approval is currently required under Delaware law for each such transaction.
 
9
Type of Transaction
   
Whether

Stockholder

Approval is

Required
Purchase of assets
    No
Purchase of stock of target not involving a merger with the company
    No
Merger of target into a subsidiary of the company
    No
Merger of the company with a target
    Yes
Under Nasdaq’s listing rules, stockholder approval would be required for our initial business combination if, for example:
 
  •  
we issue shares of Class A common stock that will be equal to or in excess of 20% of the number of shares of our Class A common stock then outstanding;
 
  •  
any of our directors, officers or substantial stockholders (as defined by Nasdaq rules) have a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly, in the target business or assets to be acquired or otherwise and the present or potential issuance of common stock could result in an increase in outstanding common shares or voting power of 5% or more; or
 
  •  
the issuance or potential issuance of common stock will result in our undergoing a change of control.
Permitted Purchases of our Securities
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our sponsor, initial stockholders, directors, officers, advisors or their affiliates may purchase shares or public warrants in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination. There is no limit on the number of shares our initial stockholders, directors, officers, advisors or their affiliates may purchase in such transactions, subject to compliance with applicable law and Nasdaq rules. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. If they engage in such transactions, they will not make any such purchases when they are in possession of any material nonpublic information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements. None of the funds held in the trust account will be used to purchase shares or public warrants in such transactions prior to completion of our initial business combination.
The purpose of any such purchases of shares could be to vote such shares in favor of the initial business combination and thereby increase the likelihood of obtaining stockholder approval of the initial business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrantholders for approval in connection with our initial business combination. Any such purchases of our securities may result in the completion of our initial business combination that may not otherwise have been possible. In addition, if such purchases are made, the public “float” of our shares of Class A common stock or warrants may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
 
10
Our sponsor, officers, directors and/or their affiliates anticipate that they may identify the stockholders with whom our sponsor, officers, directors or their affiliates may pursue privately negotiated purchases by either the stockholders contacting us directly or by our receipt of redemption requests submitted by stockholders following our mailing of proxy materials in connection with our initial business combination. To the extent that our sponsor, officers, directors, advisors or their affiliates enter into a private purchase, they would identify and contact only potential selling stockholders who have expressed their election to redeem their shares for a pro rata share of the trust account or vote against our initial business combination, whether or not such stockholder has already submitted a proxy with respect to our initial business combination. Our sponsor, officers, directors, advisors or their affiliates will only purchase shares if such purchases comply with Regulation M under the Exchange Act and the other federal securities laws.
Any purchases by our sponsor, officers, directors and/or their affiliates who are affiliated purchasers under
Rule 10b-18 under
the Exchange Act will only be made to the extent such purchases are able to be made in compliance with
Rule 10b-18,
which is a safe harbor from liability for manipulation under Section 9(a)(2) and
Rule 10b-5 of
the Exchange Act.
Rule 10b-18 has
certain technical requirements that must be complied with in order for the safe harbor to be available to the purchaser. Our sponsor, officers, directors and/or their affiliates will not make purchases of common stock if the purchases would violate Section 9(a)(2) or
Rule 10b-5 of
the Exchange Act. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchases are subject to such reporting requirements.
Redemption Rights for Public Stockholders upon Completion of our Initial Business Combination
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon the completion of our initial business combination at a
per-share price,
payable in cash, equal to the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of the initial business combination including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, divided by the number of then outstanding public shares, subject to the limitations described herein. The amount in the trust account was approximately $10.00 per public share as of December 31, 2021. The
per-share amount
we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any founder shares and placement shares (along with Cantor with respect to the placement shares) and any public shares held by them in connection with the completion of our initial business combination.
Manner of Conducting Redemptions
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon the completion of our initial business combination either (i) in connection with a stockholder meeting called to approve the initial business combination or (ii) by means of a tender offer. The decision as to whether we will seek stockholder approval of a proposed initial business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek stockholder approval under the law or stock exchange listing requirement. Under Nasdaq rules, asset acquisitions and stock purchases would not typically require stockholder approval while direct mergers with our company where we do not survive and any transactions where we issue more than 20% of our outstanding common stock or seek to amend our amended and restated certificate of incorporation would require stockholder approval. If we structure an initial business combination with a target company in a manner that requires stockholder approval, we will not have discretion as to whether to seek a stockholder vote to approve the proposed initial business combination. We may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC unless stockholder approval is required by law or stock exchange listing requirements or we choose to seek stockholder approval for business or other legal reasons. So long as we obtain and maintain a listing for our securities on NASDAQ, we will be required to comply with such rules.
If stockholder approval of the transaction is required by law or stock exchange listing requirement, or we decide to obtain stockholder approval for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation:
 
  •  
conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules, and
 
11
  •  
file proxy materials with the SEC.
In the event that we seek stockholder approval of our initial business combination, we will distribute proxy materials and, in connection therewith, provide our public stockholders with the redemption rights described above upon completion of the initial business combination.
If we seek stockholder approval, we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the initial business combination. A quorum for such meeting will consist of the holders present in person or by proxy of shares of outstanding capital stock of the company representing a majority of the voting power of all outstanding shares of capital stock of the company entitled to vote at such meeting. Our initial stockholders will count toward this quorum and pursuant to the letter agreement, our sponsor, officers and directors have agreed to vote their founder shares and placement shares and any public shares purchased during or after our initial public offering (including in open market and privately negotiated transactions) in favor of our initial business combination. For purposes of seeking approval of the majority of our outstanding shares of common stock voted,
non-votes will
have no effect on the approval of our initial business combination once a quorum is obtained. We intend to give approximately 30 days (but not less than 10 days nor more than 60 days) prior written notice of any such meeting, if required, at which a vote shall be taken to approve our initial business combination. These quorum and voting thresholds, and the voting agreements of our initial stockholders, may make it more likely that we will consummate our initial business combination. Each public stockholder may elect to redeem its public shares irrespective of whether they vote for or against the proposed transaction.
If a stockholder vote is not required and we do not decide to hold a stockholder vote for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation:
 
  •  
conduct the redemptions pursuant to
Rule 13e-4 and
Regulation 14E of the Exchange Act, which regulate issuer tender offers, and
 
  •  
file tender offer documents with the SEC prior to completing our initial business combination which contain substantially the same financial and other information about the initial business combination and the redemption rights as is required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies.
Upon the public announcement of our initial business combination, we or our sponsor will terminate any plan established in accordance with
Rule 10b5-1 to
purchase shares of our Class A common stock in the open market if we elect to redeem our public shares through a tender offer, to comply with
Rule 14e-5 under
the Exchange Act.
In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with
Rule 14e-1(a)
under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period. In addition, the tender offer will be conditioned on public stockholders not tendering more than a specified number of public shares which are not purchased by our sponsor, which number will be based on the requirement that we will only redeem our public shares so long as (after such redemption) our net tangible assets will be at least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. If public stockholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete the initial business combination.
Our amended and restated certificate of incorporation provides that we will only redeem our public shares so long as (after such redemption) our net tangible assets will be at least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. For example, the proposed initial business combination may require: (i) cash consideration to be paid to the target or its owners, (ii) cash to be transferred to the target for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the proposed initial business combination. In the event the aggregate cash consideration we would be required to pay for all shares of Class A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed initial business combination exceed the aggregate amount of cash available to us, we will not complete the initial business combination or redeem any shares, and all shares of Class A common stock submitted for redemption will be returned to the holders thereof.
 
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Limitation on Redemption upon Completion of our Initial Business Combination if we Seek Stockholder Approval
Notwithstanding the foregoing, if we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our 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 Exchange Act), is restricted from seeking redemption rights with respect to more than an aggregate of 15% of the shares sold in our initial public offering, which we refer to as the “Excess Shares.” Such restriction shall also be applicable to our affiliates. We believe this restriction will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to exercise their redemption rights against a proposed initial business combination as a means to force us or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. By limiting our stockholders’ ability to redeem no more than 15% of the shares sold in our initial public offering without our prior consent, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete our initial business combination, particularly in connection with an initial business combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination.
Tendering Stock Certificates in Connection with Redemption Rights
We may require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to our transfer agent up to two business days prior to the vote on the proposal to approve the initial business combination, or to deliver their shares to the transfer agent electronically using the DWAC System, at the holder’s option. The proxy materials that we will furnish to holders of our public shares in connection with our initial business combination will indicate whether we are requiring public stockholders to satisfy such delivery requirements. Accordingly, a public stockholder would have up to two days prior to the vote on the initial business combination to tender its shares if it wishes to seek to exercise its redemption rights. Given the relatively short exercise period, it is advisable for stockholders to use electronic delivery of their public shares.
There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC System. The transfer agent will typically charge the tendering broker $80.00 and it would be up to the broker whether or not to pass this cost on to the redeeming holder. However, this fee would be incurred regardless of whether or not we require holders seeking to exercise redemption rights to tender their shares. The need to deliver shares is a requirement of exercising redemption rights regardless of the timing of when such delivery must be effectuated.
The foregoing is different from the procedures used by many blank check companies. In order to perfect redemption rights in connection with their business combinations, many blank check companies would distribute proxy materials for the stockholders’ vote on an initial business combination, and a holder could simply vote against a proposed initial business combination and check a box on the proxy card indicating such holder was seeking to exercise his or her redemption rights. After the initial business combination was approved, the company would contact such stockholder to arrange for him or her to deliver his or her certificate to verify ownership. As a result, the stockholder then had an “option window” after the completion of the initial business combination during which he or she could monitor the price of the company’s stock in the market. If the price rose above the redemption price, he or she could sell his or her shares in the open market before actually delivering his or her shares to the company for cancellation. As a result, the redemption rights, to which stockholders were aware they needed to commit before the stockholder meeting, would become “option” rights surviving past the completion of the initial business combination until the redeeming holder delivered its certificate. The requirement for physical or electronic delivery prior to the meeting ensures that a redeeming holder’s election to redeem is irrevocable once the initial business combination is approved.
Any request to redeem such shares, once made, may be withdrawn at any time up to the date of the stockholder meeting. Furthermore, if a holder of a public share delivered its certificate in connection with an election of redemption rights and subsequently decides prior to the applicable date not to elect to exercise such rights, such holder may simply request that the transfer agent return the certificate (physically or electronically). It is anticipated that the funds to be distributed to holders of our public shares electing to redeem their shares will be distributed promptly after the completion of our initial business combination.
 
13
If our initial business combination is not approved or completed for any reason, then our public stockholders who elected to exercise their redemption rights would not be entitled to redeem their shares for the applicable pro rata share of the trust account. In such case, we will promptly return any certificates delivered by public holders who elected to redeem their shares.
If our initial proposed initial business combination is not completed, we may continue to try to complete an initial business combination with a different target by January 12, 2023.
Redemption of Public Shares and Liquidation if no Initial Business Combination
Our amended and restated certificate of incorporation provides that we will have until January 12, 2023 to complete our initial business combination. If we are unable to complete our initial business combination by January 12, 2023, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a
per-share price,
payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) above to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination within the
24-month time
period.
Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have waived their rights to liquidating distributions from the trust account with respect to any founder shares and placement shares held by them if we fail to complete our initial business combination by January 12, 2023. However, if our sponsor, officers or directors acquire public shares in or after our initial public offering, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination by January 12, 2023.
Our sponsor, officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination by January 12, 2023 or (ii) with respect to any other provision relating to stockholders’ rights or
pre-initial business
combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any such amendment 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 us to pay our taxes divided by the number of then outstanding public shares. However, we will only redeem our public shares so long as (after such redemption) our net tangible assets will be at least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules). If this optional redemption right is exercised with respect to an excessive number of public shares such that we cannot satisfy the net tangible asset requirement (described above), we would not proceed with the amendment or the related redemption of our public shares at such time.
We have sought and will continue to seek to reduce the possibility that our sponsor has to indemnify the trust account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the trust account. Our sponsor are also not liable as to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act. We have access to the proceeds of our initial public offering, held outside of the trust account, with which to pay any such potential claims (including costs and expenses incurred in connection with our liquidation, currently estimated to be no more than approximately $100,000). In the event that we liquidate and it is subsequently determined that the reserve for claims and liabilities is insufficient, stockholders who received funds from our trust account could be liable for claims made by creditors. Because our offering expenses in connection with our initial public offering (including underwriting commissions) exceeded our estimate of $1,000,000, we funded such excess with funds from the funds not held in the trust account. Accordingly, the amount of funds we intend to hold outside the trust account decreased by approximately $4,457 to approximately $995,543.
 
14
We will depend on sufficient interest being earned on the proceeds held in the trust account to pay any tax obligations we may owe. However, if those funds are not sufficient to cover the costs and expenses associated with implementing our plan of dissolution, to the extent that there is any interest accrued in the trust account not required to pay taxes, we may request the trustee to release to us an additional amount of up to $100,000 of such accrued interest to pay those costs and expenses.
If we were to expend all of the net proceeds of our initial public offering and the sale of the placement units, other than the proceeds deposited in the trust account, and without taking into account interest, if any, earned on the trust account, the
per-share redemption
amount received by stockholders upon our dissolution would be approximately $10.00. The proceeds deposited in the trust account could, however, become subject to the claims of our creditors which would have higher priority than the claims of our public stockholders. We cannot assure you that the actual
per-share redemption
amount received by stockholders will not be substantially less than $10.00. Under Section 281(b) of the DGCL, our plan of dissolution must provide for all claims against us to be paid in full or make provision for payments to be made in full, as applicable, if there are sufficient assets. These claims must be paid or provided for before we make any distribution of our remaining assets to our stockholders. While we intend to pay such amounts, if any, we cannot assure you that we will have funds sufficient to pay or provide for all creditors’ claims.
Although we have sought and will continue to seek to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public stockholders, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the trust account including but not limited to fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. Withum, our independent registered public accounting firm, and the underwriters of the offering, have not executed agreements with us waiving such claims to the monies held in the trust account.
In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the trust account for any reason. Our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act. However, we have not asked our sponsor to reserve for such indemnification obligations, nor have we independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s only assets are securities of our company. Therefore, we cannot assure you that our sponsor would be able to satisfy those obligations. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
 
15
In the event that the proceeds in the trust account are reduced below (i) $10.00 per public share or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, and our sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. We have not asked our sponsor to reserve for such indemnification obligations and we cannot assure you that our sponsor would be able to satisfy those obligations. Accordingly, we cannot assure you that due to claims of creditors the actual value of the
per-share redemption
price will not be less than $10.00 per public share.
Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination by January 12, 2023 may be considered a liquidating distribution under Delaware law. If the corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a
60-day notice
period during which any third-party claims can be brought against the corporation, a
90-day period
during which the corporation may reject any claims brought, and an additional
150-day waiting
period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholders’ pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution.
Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 24 months from the closing of our initial public offering, is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful (potentially due to the imposition of legal proceedings that a party may bring or due to other circumstances that are currently unknown), then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution. If we are unable to complete our initial business combination by January 12, 2023, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a
per-share price,
payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) above to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible after January 12, 2023, and, therefore, we do not intend to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.
Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the subsequent 10 years. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. As described above, pursuant to the obligation contained in our underwriting agreement, we have sought and will continue to seek to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account. As a result of this obligation, the claims that could be made against us are significantly limited and the likelihood that any claim that would result in any liability extending to the trust account is remote. Further, our sponsor may be liable only to the extent necessary to ensure that the amounts in the trust account are not reduced below (i) $10.00 per public share or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest withdrawn to pay taxes and will not be liable as to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act. In the event that an executed waiver is deemed to be unenforceable against a third party, our sponsor will not be responsible to the extent of any liability for such third-party claims.
 
16
If we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, we cannot assure you we will be able to return $10.00 per share to our public stockholders. Additionally, if we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by our stockholders. Furthermore, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or may have acted in bad faith, thereby exposing itself and our company to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.
Our public stockholders are entitled to receive funds from the trust account only upon the earlier to occur of: (i) the completion of our initial business combination, (ii) the redemption of any public shares properly tendered in connection with a stockholder vote to amend any provisions of our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination by January 12, 2023 or (B) with respect to any other provision relating to stockholders’ rights or
pre-initial business
combination activity, and (iii) the redemption of all of our public shares if we are unable to complete our business combination by January 12, 2023, subject to applicable law. In no other circumstances will a stockholder have any right or interest of any kind to or in the trust account. In the event we seek stockholder approval in connection with our initial business combination, a stockholders’ voting in connection with the initial business combination alone will not result in a stockholders’ redeeming its shares to us for an applicable pro rata share of the trust account. Such stockholder must have also exercised its redemption rights as described above. These provisions of our amended and restated certificate of incorporation, like all provisions of our amended and restated certificate of incorporation, may be amended with a stockholder vote.
Competition
In identifying, evaluating and selecting a target business for our initial business combination, we may encounter intense competition from other entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout funds, and operating businesses seeking strategic business combinations. Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess greater financial, technical, human and other resources than we do. Our ability to acquire larger target businesses will be limited by our available financial resources. This inherent limitation gives others an advantage in pursuing the initial business combination of a target business. Furthermore, our obligation to pay cash in connection with our public stockholders who exercise their redemption rights may reduce the resources available to us for our initial business combination and our outstanding warrants, and the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Either of these factors may place us at a competitive disadvantage in successfully negotiating an initial business combination.
Employees
We currently have three officers. These individuals are not obligated to devote any specific number of hours to our matters but they devote as much of their time as they deem necessary, in the exercise of their respective business judgement, to our affairs until we have completed our initial business combination. The amount of time our officers devote in any time period varies based on the stage of the initial business combination process we are in. We do not intend to have any full time employees prior to the completion of our initial business combination. We do not have an employment agreement with any member of our management team.
 
17
Periodic Reporting and Financial Information
We have registered our public units, Class A common stock and warrants under the Exchange Act and have reporting obligations, including the requirement that we file annual, quarterly and current reports with the SEC. In accordance with the requirements of the Exchange Act, our annual reports will contain financial statements audited and reported on by our independent registered public accountants.
We will provide stockholders with audited financial statements of the prospective target business as part of the tender offer materials or proxy solicitation materials sent to stockholders to assist them in assessing the target business. In all likelihood, these financial statements will need to be prepared in accordance with, or reconciled to, GAAP, or IFRS, depending on the circumstances, and the historical financial statements may be required to be audited in accordance with the standards of the PCAOB. These financial statement requirements may limit the pool of potential targets we may conduct an initial business combination with because some targets may be unable to provide such statements in time for us to disclose such statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame. We cannot assure you that any particular target business identified by us as a potential business combination candidate will have financial statements prepared in accordance with GAAP or that the potential target business will be able to prepare its financial statements in accordance with the requirements outlined above. To the extent that these requirements cannot be met, we may not be able to acquire the proposed target business. While this may limit the pool of potential business combination candidates, we do not believe that this limitation will be material.
We will be required to evaluate our internal control procedures for the fiscal year ending December 31, 2021 as required by the Sarbanes-Oxley Act. Only in the event we are deemed to be a large accelerated filer or an accelerated filer, and no longer qualify as an emerging growth company, will we be required to have our internal control procedures audited. A target company may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such business combination.
We have filed a Registration Statement on
Form 8-A with
the SEC to voluntarily register our securities under Section 12 of the Exchange Act. As a result, we are subject to the rules and regulations promulgated under the Exchange Act. We have no current intention of filing a Form 15 to suspend our reporting or other obligations under the Exchange Act prior or subsequent to the consummation of our initial business combination.
We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a
non-binding advisory
vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following January 12, 2026, the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our shares of Class A common stock that are held by
non-affiliates exceeds
$700 million as of the prior June 30
th
, and (2) the date on which we have issued more than $1.0 billion in
non-convertible debt
during the prior three-year period. References herein to “emerging growth company” will have the meaning associated with it in the JOBS Act.
 
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Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation
S-K.
Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by
non-affiliates exceeds
$250 million as of the end of that year’s second fiscal quarter, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held by nonaffiliates exceeds $700 million as of the end of that year’s second fiscal quarter.
 
Item 1A.
Risk Factors.
As a smaller reporting company, we are not required to include risk factors in this Report. However, below is a partial list of material risks, uncertainties and other factors that could have a material effect on the Company and its operations:
 
  •  
we are a blank check company with no revenue or basis to evaluate our ability to select a suitable business target;
 
  •  
we may not be able to select an appropriate target business or businesses and complete our initial business combination in the prescribed time frame;
 
  •  
our expectations around the performance of a prospective target business or businesses may not be realized;
 
  •  
we may not be successful in retaining or recruiting required officers, key employees or directors following our initial business combination;
 
  •  
our officers and directors may have difficulties allocating their time between our company and other businesses and may potentially have conflicts of interest with our business or in approving our initial business combination;
 
  •  
we may not be able to obtain additional financing to complete our initial business combination or reduce the number of stockholders requesting redemption;
 
  •  
if the funds held outside of our trust account are insufficient to allow us to operate until at least January 12, 2023, our ability to fund our search for a target business or businesses or complete an initial business combination may be adversely affected;
 
  •  
our independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt about our ability to continue as a going concern, since we will cease all operations except for the purpose of liquidating if we are unable to complete an initial business combination by January 12, 2023;
 
  •  
we may issue our shares to investors in connection with our initial business combination at a price that is less than the prevailing market price of our shares at that time;
 
  •  
you may not be given the opportunity to choose the initial business target or to vote on the initial business combination;
 
  •  
trust account funds may not be protected against third party claims or bankruptcy;
 
  •  
an active market for our public securities’ may not develop and you will have limited liquidity and trading;
 
  •  
the availability to us of funds from interest income on the trust account balance may be insufficient to operate our business prior to the business combination; and
 
  •  
our financial performance following a business combination with an entity may be negatively affected by their lack an established record of revenue, cash flows and experienced management.
 
  •  
there may be more competition to find an attractive target for an initial business combination, which could increase the costs associated with completing our initial business combination and may result in our inability to find a suitable target;
 
  •  
we have identified a material weakness in our internal control over financial reporting. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results;
 
  •  
changes in the market for directors and officers liability insurance could make it more difficult and more expensive for us to negotiate and complete an initial business combination;
 
  •  
we may attempt to simultaneously complete business combinations with multiple prospective targets, which may hinder our ability to complete our initial business combination and give rise to increased costs and risks that could negatively impact our operations and profitability;
 
  •  
we may engage one or more of our underwriters or one of their respective affiliates to provide additional services to us after the initial public offering, which may include acting as a financial advisor in connection with an initial business combination or as placement agent in connection with a related financing transaction. Our underwriters are entitled to receive deferred underwriting commissions that will be released from the trust account only upon a completion of an initial business combination. These financial incentives may cause them to have potential conflicts of interest in rendering any such additional services to us after the initial public offering, including, for example, in connection with the sourcing and consummation of an initial business combination;
 
19
  •  
we may attempt to complete our initial business combination with a private company about which little information is available, which may result in a business combination with a company that is not as profitable as we suspected, if at all;
 
  •  
our warrants are accounted for as derivative liabilities and are recorded at fair value upon issuance with changes in fair value each period reported in earnings, which may have an adverse effect on the market price of our common stock or may make it more difficult for us to consummate an initial business combination;
 
  •  
since our initial stockholders will lose their entire investment in us if our initial business combination is not completed (other than with respect to any public shares they may acquire during or after our initial public offering), and because our sponsor, officers and directors may profit substantially even under circumstances in which our public stockholders would experience losses in connection with their investment, a conflict of interest may arise in determining whether a particular business combination target is appropriate for our initial business combination;
 
  •  
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;
 
  •  
our ability to identify a target and to consummate an initial business combination may be adversely affected by economic uncertainty and volatility in the financial markets, including as a result of the military conflict in Ukraine;
 
  •  
the value of the founder shares following completion of our initial business combination is likely to be substantially higher than the nominal price paid for them, even if the trading price of our common stock at such time is substantially less than $10.00 per share; and
 
  •  
resources could be wasted in researching acquisitions that are not completed, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we have not completed our initial business combination within the required time period, our public stockholders may receive only approximately $10.00 per share, or less than such amount in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless.
For the complete list of risks relating to our operations, see the section titled “Risk Factors” contained in our Registration Statement; our quarterly report on Form
10-Q
for the period ended March 31, 2021, filed with the SEC on July 20, 2021; and our amended quarterly report on form
10-Q/A
for the period ended September 30, 2021, filed with the SEC on January 19, 2022.
 
Item 1B.
Unresolved Staff Comments.
Not applicable.
 
Item 2.
Properties.
Our executive offices are located at 630 Ramona Street, Palo Alto, California, 94301, and our telephone number is (619)
736-6855.
The cost for our use of this space is included in the $15,000 per month fee we pay to an affiliate of our sponsor for office space, administrative and shared personnel support services. We consider our current office space adequate for our current operations.
 
Item 3.
Legal Proceedings.
To the knowledge of our management team, there is no litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property.
 
Item 4.
Mine Safety Disclosures.
Not applicable.
 
20
PART II
 
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.
(a) Market Information
Our public units, public shares and public warrants are each traded on NASDAQ under the symbols “EPHYU,” “EPHY” and “EPHYW,” respectively. Our public units commenced public trading on January 8, 2021, and our public shares and public warrants commenced separate public trading on March 1, 2021.
(b) Holders
On March 30, 2022, there were three (3) holders of record of our units, one (1) holder of record of our shares of Class A common stock and one (1) holder of record of our warrants.
(c) Dividends
We have not paid any cash dividends on our common stock to date and do not intend to pay cash dividends prior to the completion of our initial business combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of our initial business combination. The payment of any cash dividends subsequent to our initial business combination will be within the discretion of our board of directors at such time. In addition, our board of directors is not currently contemplating and does not anticipate declaring any stock dividends in the foreseeable future. Further, if we incur any indebtedness in connection with our initial business combination, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.
(d) Securities Authorized for Issuance Under Equity Compensation Plans.
None.
(e) Recent Sales of Unregistered Securities
None.
(f) Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
 
Item 6.
Reserved.
 
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “us,” “our” or “we” refer to Epiphany Technology Acquisition Corp. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited financial statements and related notes included herein.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report including, without limitation, statements under 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. When used in this Report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward- looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on the Company’s behalf are qualified in their entirety by this paragraph.
 
21
Overview
We are a blank check company formed under the laws of the State of Delaware on September 28, 2020 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. We intend to effectuate our initial business combination using cash from the proceeds of our initial public offering and the concurrent private placement, the proceeds of the sale of our shares in connection with our initial business combination, 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.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete an initial business combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues to date. Our only activities from inception through December 31, 2021 were organizational activities and those necessary to prepare for our initial public offering, as described below, and, subsequent to our initial public offering, searching and identifying a target company for an initial business combination. We do not expect to generate any operating revenues until after the completion of our initial business combination. We generate
non-operating
income in the form of interest income on investments held in trust account after our 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 year ended December 31, 2021, we had a net income of $7,207,291, which consists of a change in the fair value warrant liabilities of $9,315,334 and interest earned on investments held in the trust account of $113,586, offset by transaction cost related to warrant liability of $1,029,081 and formation and operational costs of $1,192,548.
For the period from September 28, 2020 (inception) through December 31, 2020, we had a net loss of $1,465, which consisted of formation and operational costs.
Liquidity and Capital Resources
On January 12, 2021, we consummated our initial public offering of 40,250,000 units, which included the full exercise by the underwriters of their over-allotment option to purchase an additional 5,250,000 units, at $10.00 per unit, generating gross proceeds of $402,500,000. Simultaneously with the closing of our initial public offering, we consummated the sale of 800,000 units to our sponsor and Cantor at a price of $10.00 per unit, generating gross proceeds of $8,000,000.
Following our initial public offering, the full exercise of the over-allotment option, and the sale of the placement units, a total of $402,500,000 was placed in the trust account. We incurred $21,598,082 in transaction costs, including $6,000,000 of underwriting fees, net of $1,000,000 reimbursed from the underwriters, $15,137,500 of deferred underwriting fees and $460,582 of other offering costs.
For the year ended December 31, 2021, cash used in operating activities was $1,212,324. Net income of $7,207,291 was affected by changes in the fair value of warrant liabilities of $9,315,334, interest earned on investments held in the trust account of $113,586 and transaction costs allocated to warrants of $1,029,081. Changes in operating assets and liabilities used $19,776 of cash from operating activities.
For the period from September 28, 2020 (inception) through December 31, 2020, we do not have cash used in operating activities.
As of December 31, 2021, we had cash and investments held in the trust account of $402,613,586. Interest income on the balance in the trust account may be used by us to pay taxes. During the year ended December 31, 2021, we did not withdraw interest earned on the trust account to pay for our franchise tax obligations. We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account, which interest shall be net of taxes payable and excluding deferred underwriting commissions, to complete our initial business combination. We may withdraw interest from the trust account to pay taxes, if any. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete an initial 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.
 
22
As of December 31, 2021, we had $353,094 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 an initial business combination.
In order to fund working capital deficiencies or finance transaction costs in connection with an 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. If we complete an initial business combination, we may repay such loaned amounts out of the proceeds of the trust account released to us. In the event that an 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 units, at a price of $10.00 per unit, at the option of the lender. The units would be identical to the placement units.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking
in-depth
due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our public shares upon consummation of our initial business combination, in which case we may issue additional securities or incur debt in connection with such initial business combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our initial 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 initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
Going Concern
We have until January 12, 2023 to consummate an initial business combination. It is uncertain that we will be able to consummate an initial business combination by this time. If an initial 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 an initial business combination not occur, and potential subsequent dissolution raises substantial doubt about our ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after January 12, 2023.
Off-Balance
Sheet Financing Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2021.
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 affiliate of the sponsor a monthly fee of $15,000 for office space, utilities and secretarial and administrative and support services. We began incurring these fees on January 12, 2021 and will continue to incur these fees monthly until the earlier of the completion of the initial business combination and our liquidation.
The underwriters are entitled to a deferred fee of (i) 3.5% of the gross proceeds of the initial 35,000,000 units sold in our initial public offering, or $12,250,000, and (ii) 5.5% of the gross proceeds from the units sold pursuant to the over-allotment option, or $2,887,500. The deferred fee will become payable to the underwriters from the amounts held in the trust account solely in the event that we complete an initial business combination, subject to the terms of the underwriting agreement.
 
23
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:
Warrant Liability
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 ASC 480 and ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). We account for our warrants in accordance with the guidance contained in Accounting Standards Codification (“ASC”)
815-4
under which the warrants that do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify our warrants as liabilities at their fair value and adjust the warrants to fair value at each reporting period. This liability is subject tore-measurement at each balance sheets date until exercised, and any change in fair value is recognized in our statements of operations. The fair value of our private placement warrants was determined using a binomial lattice model incorporating the
Cox-Ross-Rubenstein
methodology. The public warrants for periods where no observable traded price was available are valued using a binomial lattice model incorporating the
Cox-Ross-Rubenstein
methodology. For periods subsequent to the detachment of the public warrants from the units, the public warrant quoted market price was used as the fair value as of each relevant date.
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 the Financial Accounting Standards Board’s (“FASB”) ASC Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption, if any, are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our Class A common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ (deficit) equity section of our balance sheets. We recognize changes in redemption value immediately as they occur and adjusts the carrying value of the Class A ordinary shares subject to possible redemption to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security.
Net Income (Loss) per Common 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 (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Accretion associated with the redeemable shares of Class A common stock is excluded from income (loss) per common share as the redemption value approximates fair value.
Recent Accounting Standards
In August 2020, the FASB issued ASU No.
2020-06, “Debt-
Debt with Conversion and Other Options (Subtopic
470-20)
and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU
2020-06”),
which simplifies accounting for convertible instruments by removing major separation models required under current GAAP.
ASU 2020-06
removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU
2020-06
is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact of adoption of ASU
2020-06.
 
24
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
Factors That May Adversely Affect Our Results of Operations
Our results of operations and our ability to complete an initial business combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the ongoing effects of the COVID-19 pandemic, including resurgences and the emergence of new variants, and geopolitical instability, such as the military conflict in the Ukraine. We cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and our ability to complete an initial business combination.
 
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk.
Not required for smaller reporting companies.
 
Item 8.
Financial Statements and Supplementary Data.
This information appears following Item 15 of this Report and is included herein by reference.
 
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
 
Item 9A.
Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
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 December 31, 2021. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules
13a-15(e)
and
15d-15(e)
under the Exchange Act) were not effective, due solely to the material weakness in our internal control over financial reporting related to our accounting for complex financial instruments. As a result, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with GAAP. Accordingly, management believes that the financial statements included in this Report present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
Management has identified a material weakness in internal controls related to the accounting for complex financial instruments. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to continue to enhance our system of evaluating and implementing the accounting standards that apply to our financial statements, including through enhanced analyses by 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
Management’s Annual Report on Internal Controls over Financial Reporting
As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, (as defined in Rules
13a-15(e)
and
15-
d-15(e)
under the Exchange Act) our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company,
 
25
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting at December 31, 2021. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our assessments and those criteria, management determined that we did not maintain effective internal control over financial reporting as of December 31, 2021.
Management has implemented remediation steps to improve our internal control over financial reporting. Specifically, we expanded and improved our review process for complex securities and related accounting standards. We plan to further improve this process by enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications and consideration of additional staff with the requisite experience and training to supplement existing accounting professionals.
This Report does not include an attestation report of our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules
13a-15(f)
and
15d-15(f)
of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Our internal control over financial reporting did not result in the proper classification of our warrants. Since issuance on January 12, 2021, our warrants were accounted for as equity within our balance sheet. On April 12, 2021, the SEC Staff issued the SEC Staff Statement in which the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to equity. After discussion and evaluation, taking into consideration the SEC Staff Statement, we have concluded that our warrants should be presented as liabilities with subsequent fair value remeasurement as previously restated in the Transition Report. In addition, our management has concluded that our controls around the interpretation and accounting for certain complex features of public shares issued by the Company was not effectively designed or maintained resulting in the misclassification of public shares as permanent equity instead of temporary equity.
The Chief Executive Officer and Chief Financial Officer performed additional accounting and financial analyses and other post-closing procedures including consulting with subject matter experts related to the accounting for certain complex features of the public shares and warrants. The Company’s management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation and improvement of our internal control over financial reporting. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we have expanded and will continue to improve these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards.
 
Item 9B.
Other Information.
None.
 
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
 
26
PART III
 
Item 10.
Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers
As of the date of this Report, our directors and officers are as follows:
 
Name
   
Age
   
Position
Arthur Coviello
    68    Chairman of the Board
Paul Deninger
    63    Vice Chairman of the Board
Peter Bell
    57    Chief Executive Officer, Chief Financial Officer and Director
Kirk Arnold
    62    Director
Paul Flanagan
    57    Director
Melissa McJannet
    50    Director
JD Sherman
    56    Director
The experience of our directors and executive officers is as follows:
Arthur Coviello
, our Chairman since our inception on September 28, 2020, is a deeply experienced technology industry CEO and board member. From 2001 to 2006, Mr. Coviello served as President and Chief Executive Officer of RSA (previously NASDAQ: RSAS) and following RSA’s acquisition by EMC (previously NYSE: EMC) for $2.1 billion, as an Executive Vice President of EMC and head of its Security Division from 2006 to 2015. During his leadership tenure at RSA, Mr. Coviello oversaw 17 acquisitions, driving growth and solidifying RSA’s leadership position in the cybersecurity industry. Mr. Coviello has been a central figure within the information security industry for more than 25 years. His strategic vision and management as Chief Executive Officer of RSA helped drive the company’s growth to revenues of approximately $1 billion in 2015. Under his leadership, Mr. Coviello built RSA Conference into one of the most respected, vendor agnostic events in cybersecurity. Mr. Coviello’s expertise and influence have made him a recognized leader in the industry as he is frequently a featured presenter at conferences and forums around the world, and he has played key roles in several national cybersecurity initiatives. Mr. Coviello currently serves on the board of directors of both public and private companies, including Mandiant (NASDAQ: MNDT) which was previously known as FireEye, an
intelligence-led
cybersecurity solutions provider, Synchrony Financial (NYSE: SYF), a consumer financial services company since 2015, and Tenable (NASDAQ: TENB), a provider of Cyber Exposure solutions since 2018, Bugcrowd, a crowdsource cybersecurity platform since 2015, SecZetta, a third party identity risk solutions provider since 2019 and Cybereason, a leading cybersecurity company in operation-centric attack protection since 2021. Previously, Mr. Coviello has served on the boards of directors of various technology companies including Cylance, sold to Blackberry (NYSE: BB) for $1.4 billion, Verodin, sold to FireEye (NASDAQ: MNDT) for $250 million, Gigamon, provider of network visibility and data traffic management software and Enernoc, provider of energy intelligence software and demand response services. Currently, Mr. Coviello is an active investor, advisor and board member of a number of private companies, guiding technology startups as a private investor and in his roles as a Venture Partner at Rally Ventures, an early stage investor in business technologies, as an advisor to ClearSky Security Fund and as a Senior Advisor to Blackstone’s Tactical Opportunities Group. Prior to RSA, Mr. Coviello had extensive executive management experience in several technology companies. He started his career as a certified public accountant at Deloitte, Haskins & Sells. Mr. Coviello graduated magna cum laude from the University of Massachusetts with a BBA, concentration in accounting. Mr. Coviello is well qualified to serve as on our Board due to his extensive operational, executive and board experience in the technology industry.
 
27
Paul Deninger
, our Vice Chairman since our inception on September 28, 2020, is an experienced board director, accomplished Chief Executive Officer and trusted advisor to technology industry CEOs. Mr. Deninger previously served as the Chairman and Chief Executive Officer of Broadview International, a technology focused investment bank, from 1996 until 2003, when the company was acquired by Jefferies. During Mr. Deninger’s tenure as Chief Executive Officer at Broadview, he helped the company increase its revenue from $50 million in 1996 to over $300 million by 2000. From 2003 to 2020, Mr. Deninger served in senior leadership positions at prominent investment banks. Mr. Deninger was a Vice Chairman at Jefferies from 2003 to 2010 and was
Co-Head of
Technology Investment Banking at Jefferies immediately following its acquisition of Broadview. In that capacity, Mr. Deninger led Jefferies’ entry into the technology initial public offering business. From 2011 to February 2020, Mr. Deninger was a Senior Managing Director and Senior Advisor at Evercore. Over the past 30 years of his distinguished career, in the technology industry, Mr. Deninger has developed a deep capital markets experience, having completed over 150 IPO, M&A, and financing transactions with the world’s leading technology companies and
top-tier private
equity and venture capital firms and advised hundreds of CEOs and boards on shareholder value creation, including how to leverage technology to achieve transformation and growth. Mr. Deninger currently serves as a Senior Managing Director at Davis Partners Group, an advisory firm that provides
C-suite and
Board level consulting services, and a Venture Partner at Material Impact, an early stage venture firm focused on identifying and supporting groundbreaking material science technologies and companies. Mr. Deninger is considered a thought leader in Technology Finance and has been a keynote speaker at numerous technology and VC industry events including National Venture Capital Association, European Venture Capital Association, Red Herring Global and a panelist and a
14-year attendee
at World Economic Forum at Davos. Mr. Deninger was a member of the US Treasury IPO Task Force that led to the 2012 JOBS Act, and a member of the Executive Council of TechNet, a national network of technology CEOs and senior executives. Additionally, from 2001 to 2006, he also served on the board for The Boston Globe, a leading newspaper in New England and a division of the New York Times, and from 2010 to 2021, he served on the board of Iron Mountain (NYSE: IRM), an enterprise information management company focused on data and record management, where Mr. Deninger sat on the Finance Committee and Compensation Committee and previously served on the Risk and Safety committee and oversaw the CEO search process. Mr. Deninger currently serves on the boards of two public and three private companies that are primarily focused on technology or have been undergoing a technology transformation including Resideo (NYSE: REZI), a smart home products and systems solution provider, since 2018 where Mr. Deninger sits on the Audit Committee and Technology Committee and Chairs the Finance Committee, EverQuote (NASDAQ: EVER), an online marketplace for consumer auto, home and life insurance, since 2019 where Mr. Deninger sits on the Audit Committee and Compensation Committee, VANTIQ, a technology platform that allows users to develop and deploy real-time applications, SmartShift, a provider of legacy to cloud automation tools, and EcoSmart Solution, an energy services company that develops and provides managed services to energy efficient residential communities. Furthermore, Mr. Deninger also serves as a member of the board of advisors for SoftServe, a digital consulting and software development company, Tomorrow.io, a disruptive weather technology company that has built the world’s only Weather Intelligence Platform, and Absolute Software (NASDAQ: ABST), a leading endpoint security and data risk management software company. Mr. Deninger received a Bachelor of Science from Boston College and an M.B.A. from Harvard Business School. Mr. Deninger is well qualified to serve as on our Board due to his extensive operational, finance and executive experience in finance and banking, as well as his board experience in the technology industry.
Peter Bell
, our Chief Executive Officer, Chief Financial Officer and a Director since our inception on September 28, 2020, has served as General Partner at Amity Ventures, a venture capital fund based in San Francisco, from 2018 to 2020, and Chairman of Amity Ventures since 2020. Mr. Bell has spent three decades starting, building, and investing in technology businesses, resulting in investor liquidity of more than $6 billion. His thematic areas of focus include Machine Learning, Big Data, Virtual/Augmented Reality, Cybersecurity, Internet of Things, Autonomous Logistics, Data Analytics, Cloud Computing, Personal/Mobile Commerce, Payments, and Enterprise Software. Mr. Bell began his career at Price Waterhouse in Boston, and, in late 1986, joined EMC and relocated to San Francisco in 1987 to help lead EMC efforts in Silicon Valley. In 1998, Mr. Bell embarked on his own entrepreneurial journey and co-founded StorageNetworks, a pioneer in cloud computing. Mr. Bell led the company as its Chief Executive Officer, taking the company from concept to $123 million in annual revenue within three years, and completing its IPO in 2000. After StorageNetworks, Mr. Bell formed his own investment firm, Stowe Capital, focusing on early stage investments in enterprise software, data center infrastructure, and consumer internet companies. In 2006, Mr. Bell joined Highland Capital Partners, a global venture capital firm with current AUM of $3.5 billion, where he led investments in early and growth stage technology companies, and served as the Managing General Partner of the firm from 2015 to 2016.
In the last five years, Mr. Bell has served on the board at Accelevents, an all-in-one virtual and hybrid events platform; Playco Global, a developer of instant-play games across a variety of platforms; Vowel, a developer of a meeting application designed to help clients record and annotate conversations; Column, the first collaborative public notice platform helping journalists, governments, and legal services work together; and Apex Technology Acquisition Corp. (previously NASDAQ: APXT), a blank check company which consummated its initial business combination with AvePoint, Inc. (NASDAQ: AVPT), a data management solutions provider of Microsoft cloud services to large and mid-market enterprises, since 2019. Additionally, Mr. Bell has served on the boards of numerous technology companies including LevelUp, an ordering, payments, and loyalty experiences provider for restaurants, from 2008 to 2018; Turbonomic, an enterprise software company, from 2009 to 2018; WePay, an integrated payments provider affiliated with Chase bank, from 2010 to 2017; Qumulo, a hybrid cloud storage provider, from 2012 to 2018; Gigamon, provider of network visibility and data traffic management software, from 2010 to 2012; Ocarina, provider of online storage optimization solutions, from 2007 to 2010; and ENJOY (NASDAQ: ENJY), a provider of same-day technology delivery and setup services, from 2015 to 2019. Mr. Bell was a member of the faculty at MIT Sloan School of Management from 2003 to 2006, where he taught Entrepreneurship, and a Distinguished Executive in Residence and member of the faculty at Boston College from 2003 to 2010, where he taught at the Carroll School of Management. He served as a University Trustee at Boston College from 2002 to 2010, and currently serves as a Trustee Associate. Mr. Bell holds a Bachelor of Science in Management from Boston College, an M.B.A. from the Harvard Business School, and an Honorary Doctorate from Babson College. Mr. Bell is well qualified to serve on our Board due to his extensive operational, investing, and board experience in the technology industry.
 
28
Kirk Arnold,
 one of our directors since January 2021, has since 2018 been an
Executive-in-Residence at
General Catalyst Ventures, a venture capital firm,, where she works with management teams to help scale and drive growth. In that capacity, Ms. Arnold serves on the board of The Predictive Index, a provider of talent optimization software, since 2019. Ms. Arnold spent over 30 years as an executive in the technology industry, most recently as the Chief Executive Officer of Data Intensity, a cloud-based applications and analytics provider from 2013 to 2017. Prior to Data Intensity, Ms. Arnold served as the Chief Operating Officer of Avid Technology (NASDAQ: AVID), a developer and seller of software and hardware for digital media production and management from 2008 to 2012, as Chief Executive Officer and President of Keane, Inc. (NYSE: NEX), a
mid-tier outsourcer
global technology company in 2007 and as Chief Executive Officer of NerveWire Inc, a management consulting and systems integration provider from 2000 to 2003. Ms. Arnold is currently an independent board member of Ingersoll Rand (NYSE: IR), a provider of industrial technologies and services, Trane Technologies (NYSE: TT), a manufacturer and servicer of HVAC systems, and Thomson Reuters Corp (NYSE: TRI), a multinational media conglomerate. Ms. Arnold is involved with a number of
non-profit organizations,
including Bay Path University, where she is a member of the Board of Trustees, and the UP Education Network, where she serves on the Board. In addition, she is a Senior Lecturer at the MIT Sloan School of Management, and an advisor to the Trust Center for MIT Entrepreneurship. Ms. Arnold holds a B.A. degree from Dartmouth College. Ms. Arnold is well qualified to serve on our Board due to her extensive operational, investing and board experience in the technology industry.
Paul Flanagan,
 one of our directors since January 2021, since 2017 has served as President and Chief Executive Officer of Nasuni, a provider of cloud-based enterprise file services. Mr. Flanagan spent the first 9 years of his career with Ernst & Young LLP in Entrepreneurial Services and Mergers and Acquisitions. Mr. Flanagan then served in senior management roles in finance and operations at Vitol Gas and Electric (acquired by Coral Energy) from 1995 to 1997 and Lasertron Inc., a provider of optical amplifiers used in telecommunications (acquired by Corning) from 1997 to 1999. From 1999 to 2003, he served as Chief Executive Officer, Chief Operating Officer and Chief Financial Officer at various times of StorageNetworks, a pioneer in cloud computing which he helped take public in 2000. From 2003 to 2006, Mr. Flanagan was Executive Vice President and Chief Financial Officer of VistaPrint Ltd., a manufacturer and retailer of customizable marketing products, where he helped guide and close its initial public offering in 2005. Mr. Flanagan has been serving as Managing Director at Sigma Prime Ventures, a technology venture firm that he co-founded in 2011, and a Managing Director at Sigma Partners, a venture capital firm, which he joined in 2006. During Mr. Flanagan’s time at Sigma Prime Ventures and Sigma Partners, he has served on the board of Wordstream, an online marketing software solution provider that was acquired by Gannet in 2018, High Street Partners, a provider of finance and administrative services that was acquired by Hg Capital in 2014, Coherent Path, a developer of email marketing services that was acquired by Movable Ink in 2022, NS1, a developer of traffic management platform, and Contently, a developer of a content-marketing platform. Mr. Flanagan holds a B.S. in Accounting from Bentley University and was a Certified Public Accountant. Mr. Flanagan is well qualified to serve on our Board due to his extensive operational, finance, investing and board experience in the technology industry.
Melissa McJannet,
 one of our directors since January 2021, has since 2018 served as Northleaf Capital Partner’s (“Northleaf”) Venture Partner and Senior Advisor, providing strategic oversight of Northleaf’s venture capital program. Ms. McJannet is a member of the Investment Committees for Northleaf’s Canadian venture capital funds. Ms. McJannet previously served as a Managing Director on the private equity investment team and leading Northleaf’s corporate development activities. Prior to joining Northleaf’s predecessor, TD Capital, in 2005, Ms. McJannet was an investment professional at Mayfield, one of the leading venture capital firms in Silicon Valley from 2000, where she invested directly in early-stage technology companies and worked closely with management teams to help grow their businesses. Previously, Ms. McJannet worked in business development and finance roles for a telecommunications company in Chile and for the high-speed Internet access division of Rogers Cable in Toronto. Prior to that, from 1994 to 1996, Ms. McJannet was in the investment banking group of RBC Dominion Securities, where she worked on a variety of mergers and acquisition assignments. Ms. McJannet received a B.A. (Honours) from Queen’s University and an M.B.A. from the Graduate School of Business at Stanford University. Ms. McJannet is well qualified to serve on our Board due to her extensive financial and investing experience in the technology industry.
 
29
JD Sherman,
 one of our directors since January 2021, currently serves as Chief Executive Officer of Dashlane, a provider of identity management applications. Mr. Sherman has previously served as President and Chief Operating Officer at HubSpot (NYSE: HUBS), a provider of inbound marketing, sales, customer service and CRM software, from 2012 through June 2020. Mr. Sherman helped lead HubSpot into the public markets through the company’s IPO in October 2014. Prior to HubSpot, Mr. Sherman spent six years as Chief Financial Officer of Akamai (NASDAQ: AKAM), a content delivery network, cybersecurity and cloud services provider, where he was responsible for finance, strategic planning, and corporate development during a period of significant growth for Akamai. He also served as the Chief Financial Executive of IBM’s $21 billion Systems and Technology Group. During his
15-year career
at IBM (NYSE: IBM), Mr. Sherman held a number of senior executive positions in finance. Mr. Sherman currently serves on the board of Citrix (NASDAQ: CTXS), a desktop virtualization, networking and cloud computing technology provider since March 2020, and has served on the board of various technology companies including Fiserv (NASDAQ: FISV), a financial services technology solutions provider from 2015 to 2019, Cypress Semiconductor (NASDAQ: CY), a designer and manufacturer of semiconductor products intended to offer mixed-signal and programmable technology from 2010 to 2015, 3Com (previously NASDAQ: COMS), a provider of ethernet and various network interface controller technologies from 2008 to 2009, and AMI Semiconductor (previously NASDAQ: AMIS), a designer and manufacturer of application specific integrated circuits from 2007 to 2008. Mr. Sherman holds a B.A. in Economics from Emory University and an MBA from the University of Chicago. Mr. Sherman is well qualified to serve on our Board due to his extensive operational, finance and board experience in the technology industry.
Advisors
Alex Vieux
 is the Chairman and
co-founder
of Explorer Acquisitions (“Explorer”), a serial SPAC sponsor, and Chief Executive Officer of Herring International, a Belgian corporation. Over the last 35 years, he has worked with and engaged
C-suite
executives from five continents, scouting disruptive companies later embraced by the markets. Red Herring has ranked the most prominent startups in the global technology industry and featured them in its publication since 1993. Many of the Red Herring “Top 100” end up being acquired or going public. Mr. Vieux started his career at Arthur Andersen LLP (now Accenture plc). Then he
co-founded
two technology companies, C•ATS Software, Inc. and Renaissance Software, both fintech startups that either went public or were sold in the 1990s. He also founded ETRE, The European Technology Roundtable Exhibition, a yearly forum assembling technology world leaders. He was elected on the board of directors of Tandem Computers, Inc. and Computer Associates (listed on NYSE), Checkpoint Software, Commerce One, Inc. (Nasdaq: CMRC) and Qualys, Inc. (Nasdaq: OLYS) as well as dozens of private companies. Mr. Vieux served as an advisor to CTAC and APXT prior to their respective initial business combinations. Mr. Vieux serves as an advisor to ETAC, CTAQ, ENAC, ENTF and BIOS. A graduate of the Institute d’Etudes Politiques and the French business school HEC, Mr. Vieux also holds a law degree from the Universite de Paris and an M.B.A. from Stanford University, where he was a Fulbright Scholar.
Steven Fletcher
 is the Chief Executive Officer and
co-founder
of Explorer. Before
co-founding
Explorer, Mr. Fletcher advised numerous technology companies on mergers, acquisitions and other strategic transactions in his 24 year career as an investment banker. Mr. Fletcher worked in the Investment Banking Division at Goldman Sachs for more than eight years, where he held a number of leadership roles including head of Information Technology Services banking, head of Systems and Storage banking and head of the Private Placement Group. In 2003, he helped found an investment bank, GCA (formerly known as Savvian LLC), which had grown to approximately 400 professionals at the time of his departure. Mr. Fletcher was a member of GCA’ s U.S. management committee and head of the software group and
co-head
of the digital media group. He served as an advisor to CTAC and APXT prior to their respective initial business combinations. Mr. Fletcher serves as an advisor to ETAC, CTAQ, ENAC, ENTF and BIOS. He also serves on the board of directors of Lee Enterprises (Nasdaq: LEE), a U.S. media and information company. He holds a B.A. in Economics from UCLA and an M.B.A. in Finance from The Wharton School of the University of Pennsylvania.
Our advisors (i) assist us in sourcing and negotiating with potential business combination targets, (ii) provide their business insights when we assess potential business combination targets and (iii) upon our request, provide their business insights as we work to create additional value in the businesses that we acquire. In this regard, they fulfill some of the same functions as our board members. However, they have no written advisory agreement with us. Additionally, except as disclosed under “Certain Relationships and Related Party Transactions, and Director Independence” our advisors have no other employment or compensation arrangements with us. Moreover, our advisors are not under any fiduciary obligations to us, nor do they perform board or committee functions, nor do they have any voting or decision making capacity on our behalf. They also are not required to devote any specific amount of time to our efforts or be subject to the fiduciary requirements to which our board members are subject. Accordingly, if any of our advisors becomes aware of a business combination opportunity which is suitable for any of the entities to which he has fiduciary or contractual obligations (including other blank check companies), he will honor his fiduciary or contractual obligations to present such business combination opportunity to such entity, and only present it to us if such entity rejects the opportunity. We may modify or expand our roster of advisors as we source potential business combination targets or create value in businesses that we may acquire.
 
30
Number and Terms of Office of Officers and Directors
We have seven directors. Our board of directors is divided into three classes with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a three-year term. In accordance with Nasdaq corporate governance requirements, we are not required to hold an annual meeting until one year after our first fiscal year end following our listing on NASDAQ. The term of office of the first class of directors, consisting of Mr. Sherman, Ms. Arnold and Ms. McJannet will expire at our first annual meeting of stockholders. The term of office of the second class of directors, consisting of Messrs. Bell and Flanagan, will expire at the second annual meeting of stockholders. The term of office of the third class of directors, consisting of Messrs. Coviello and Deninger, will expire at the third annual meeting of stockholders.
Our officers are appointed by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide that our officers may consist of a Chairman of the Board, Chief Executive Officer, Chief Financial Officer, President, Vice Presidents, Secretary, Treasurer, Assistant Secretaries and such other offices as may be determined by the board of directors.
Committees of the Board of Directors
Our board of directors has two standing committees: an audit committee and a compensation committee. Subject to
phase-in rules
and a limited exception, Nasdaq rules and
Rule 10A-3 of
the Exchange Act require that the audit committee of a listed company be comprised solely of independent directors, and Nasdaq rules require that the compensation committee of a listed company be comprised solely of independent directors.
Audit Committee
We have established an audit committee of the board of directors. Messrs. Flanagan and Sherman and Ms. McJannet serve as members of our audit committee, and Mr. Flanagan chairs the audit committee. Under the Nasdaq listing standards and applicable SEC rules, we are required to have at least three members of the audit committee, all of whom must be independent. Each of Messrs. Flanagan and Sherman and Ms. McJannet meets the independent director standard under Nasdaq listing standards and under
Rule 10-A-3(b)(1)
of the Exchange Act.
Each member of the audit committee is financially literate, and our board of directors has determined that Mr. Flanagan qualifies as an “audit committee financial expert” as defined in applicable SEC rules.
We have adopted an audit committee charter, which details the principal functions of the audit committee, including:
 
  •  
the appointment, compensation, retention, replacement, and oversight of the work of the independent registered public accounting firm engaged by us;
 
  •  
pre-approving all
audit and permitted
non-audit services
to be provided by the independent registered public accounting firm engaged by us, and establishing
pre-approval policies
and procedures;
 
  •  
setting clear hiring policies for employees or former employees of the independent registered public accounting firm, including but not limited to, as required by applicable laws and regulations;
 
  •  
setting clear policies for audit partner rotation in compliance with applicable laws and regulations;
 
  •  
obtaining and reviewing a report, at least annually, from the independent registered public accounting firm describing (i) the independent registered public accounting firm’s internal quality-control procedures, (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues and (iii) all relationships between the independent registered public accounting firm and us to assess the independent registered public accounting firm’s independence;
 
31
  •  
reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation
S-K promulgated
by the SEC prior to us entering into such transaction; and
 
  •  
reviewing with management, the independent registered public accounting firm, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities.
Compensation Committee
We have established a compensation committee of the board of directors. Mr. Sherman and Ms. Arnold serve as members of our compensation committee. Under the Nasdaq listing standards and applicable SEC rules, we are required to have at least two members of the compensation committee, all of whom must be independent. Mr. Sherman and Ms. Arnold are independent and Ms. Arnold chairs the compensation committee.
We have adopted a compensation committee charter, which details the principal functions of the compensation committee, including:
 
  •  
reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, if any is paid by us, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation;
 
  •  
reviewing and approving on an annual basis the compensation, if any is paid by us, of all of our other officers;
 
  •  
reviewing on an annual basis our executive compensation policies and plans;
 
  •  
implementing and administering our incentive compensation equity-based remuneration plans;
 
  •  
assisting management in complying with our proxy statement and annual report disclosure requirements;
 
  •  
approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees;
 
  •  
if required, producing a report on executive compensation to be included in our annual proxy statement; and
 
  •  
reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.
It is likely that prior to the consummation of an initial business combination, the compensation committee will only be responsible for the review and recommendation of any compensation arrangements to be entered into in connection with such initial business combination.
The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by NASDAQ and the SEC.
Director Nominations
We do not have a standing nominating committee though we intend to form a corporate governance and nominating committee as and when required to do so by law or Nasdaq rules. In accordance with Rule 5605 of the Nasdaq rules, a majority of the independent directors may recommend a director nominee for selection by the board of directors. The board of directors believes that the independent directors can satisfactorily carry out the responsibility of properly selecting or approving director nominees without the formation of a standing nominating committee. The directors who will participate in the consideration and recommendation of director nominees are Ms. Arnold and Ms. McJannet and Messrs. Flanagan and Sherman. In accordance with Rule 5605 of the Nasdaq rules, all such directors are independent. As there is no standing nominating committee, we do not have a nominating committee charter in place.
 
32
The board of directors will also consider director candidates recommended for nomination by our stockholders during such times as they are seeking proposed nominees to stand for election at the next annual meeting of stockholders (or, if applicable, a special meeting of stockholders). Our stockholders that wish to nominate a director for election to our board of directors should follow the procedures set forth in our bylaws.
We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our stockholders.
Code of Ethics
We have filed a copy of our Code of Ethics and our audit and compensation committee charters as exhibits to our Registration Statement and copies are available on our website at
https://epiphanytechacquisition.com/sec-filings.
You are able to review these documents by accessing our public filings at the SEC’s web site at
 www.sec.gov
. In addition, a copy of the Code of Ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on
Form 8-K.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires our executive officers, directors and persons who beneficially own more than 10% of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. These executive officers, directors, and greater than 10% beneficial owners are required by SEC regulation to furnish us with copies of all Section 16(a) forms filed by such reporting persons. Based solely on our review of such forms furnished to us and written representations from certain reporting persons, we believe that during the year ended December 31, 2021, all reports applicable to our executive officers, directors and greater than 10% beneficial owners were filed in a timely manner in accordance with Section 16(a) of the Exchange Act.
 
Item 11.
Executive Compensation.
Since January 7, 2021, we have paid and will continue to pay an affiliate of our sponsor a total of $15,000 per month for office space, utilities and secretarial and administrative support. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees.
None of our executive officers or directors has received any cash (or
non-cash)
compensation for services rendered to us. We may pay our sponsor or any of our existing officers or directors, or any entity with which they are affiliated, a finder’s fee, consulting fee or other compensation in connection with identifying, investigating and completing our initial business combination, which may be paid from the proceeds held in the trust account upon consummation of an initial business combination. These individuals and entities are reimbursed for any
out-of-pocket expenses
incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee reviews on a quarterly basis all payments that were made to our sponsor, officers or directors, advisors or our or their affiliates. Any such payments prior to an initial business combination are made using funds held outside the trust account. Other than quarterly audit committee review of such payments, we do not expect to have any additional controls in place governing our reimbursement payments to our directors and executive officers for their
out-of-pocket expenses
incurred in connection with identifying and consummating an initial business combination.
After the completion of our initial business combination, directors or members of our management team who remain with us may be paid consulting or management fees from the combined company. All of these fees will be fully disclosed to stockholders, to the extent then known, in the tender offer materials or proxy solicitation materials furnished to our stockholders in connection with a proposed initial business combination. We have not established any limit on the amount of such fees that may be paid by the combined company to our directors or members of management. It is unlikely the amount of such compensation will be known at the time of the proposed initial business combination, because the directors of the post-combination business will be responsible for determining officer and director compensation. Any compensation to be paid to our officers will be determined, or recommended to the board of directors for determination, either by a compensation committee constituted solely by independent directors or by a majority of the independent directors on our board of directors.
 
33
We do not intend to take any action to ensure that members of our management team maintain their positions with us after the consummation of our initial business combination, although it is possible that some or all of our officers and directors may negotiate employment or consulting arrangements to remain with us after our initial business combination. The existence or terms of any such employment or consulting arrangements to retain their positions with us may influence our management’s motivation in identifying or selecting a target business but we do not believe that the ability of our management to remain with us after the consummation of our initial business combination will be a determining factor in our decision to proceed with any potential business combination. We are not party to any agreements with our officers and directors that provide for benefits upon termination of employment.
 
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth information regarding the beneficial ownership of our common stock as of March 30, 2022 based on information obtained from the persons named below, with respect to the beneficial ownership of common stock, by:
 
  •  
each person known by us to be the beneficial owner of more than 5% of our outstanding common stock;
 
  •  
each of our executive officers and directors that beneficially owns our common stock; and
 
  •  
all our executive officers and directors as a group.
In the table below, percentage ownership is based on 51,112,500 shares of our common stock, consisting of (i) 41,050,000 shares of our Class A common stock and (ii) 10,062,500 shares of our Class B common stock, issued and outstanding as of March 30, 2022. On all matters to be voted upon holders of the shares of Class A common stock and shares of Class B common stock vote together as a single class. Currently, all of the shares of Class B common stock are convertible into Class A common stock on a
one-for-one
basis.
Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. The following table does not reflect record or beneficial ownership of the placement units as these private units are not exercisable within 60 days of the date of this Report.
 
    
Class A Common Stock
    
Class B Common Stock
    
Approximate
  
Name and Address of Beneficial Owner (1)
   
Number of

Shares

Beneficially

Owned
     
Approximate

Percentage

of Class
    
Number of

Shares

Beneficially

Owned(2)
     
Approximate

Percentage

of Class
    
Percentage

of Outstanding

Common
Stock
  
Epiphany Technology Sponsor LLC (3)
      450,000        1.1 %      10,062,500        100.0 %      20.6 % 
Arthur Coviello
      —          —         —          —         —    
Paul Deninger
      —          —         —          —         —    
Peter Bell
      —          —         —          —         —    
Kirk Arnold
      —          —         —          —         —    
Paul Flanagan
      —          —         —          —         —    
Melissa McJannet
      —          —         —          —         —    
JD Sherman
      —          —         —          —         —    
All executive officers and directors as a group (7 individuals)
      450,000        1.1 %      10,062,500        100.0 %      20.6 % 
Saba Capital Management L.P. (4)
      2,373,295        5.8 %      —          —         4.6 % 
Highbridge Capital Management, LLC (5)
      2,520,565        6.1 %      —          —         4.9 % 
 
34
*
less than 1%
 
(1)
Unless otherwise noted, the business address of each of the following entities or individuals is c/o Epiphany Technology Acquisition Corp., 630 Ramona Street, Palo Alto, California, 94301.
 
(2)
Interests shown consist solely of founder shares, classified as shares of Class B common stock, as well as placement shares after our initial public offering. Founder shares are convertible into shares of Class A common stock on a
one-for-one
basis, subject to adjustment.
 
(3)
Our sponsor, Epiphany Technology Sponsor LLC, is the record holder of the securities reported herein. Paul Deninger, our Vice Chairman, Alex Vieux and Steven Fletcher are the managing members of our sponsor. Each of our officers, directors and advisors is or will also be, directly or indirectly, a member of our sponsor. In addition, Explorer Parent LLC is a member of our sponsor. Messrs. Vieux and Fletcher are managing members of Founder Holdings LLC, which is the managing member of Explorer Parent LLC. By virtue of these relationships, each of the entities and individuals named in this footnote may be deemed to share beneficial ownership of the securities held of record by our sponsor. Each of them disclaims any such beneficial ownership except to the extent of their pecuniary interest.
 
(4)
According to a Schedule 13G filed on January 21, 2022, the shares may be deemed beneficially owned by Saba Capital Management, L.P., a Delaware limited partnership, Saba Capital Management GP, LLC, a Delaware limited liability company, and Mr. Boaz R. Weinstein. The business address of each such person is 405 Lexington Avenue, 58th Floor, New York, New York 10174.
 
(5)
According to a Schedule 13G filed on February 3, 2022, the shares are held by certain funds advised by Highbridge Capital Management, LLC. The address of the principal business office is277 Park Avenue, 23rd Floor, New York, New York 10172.
Securities Authorized for Issuance under Equity Compensation Table
None.
Changes in Control
None.
 
Item 13.
Certain Relationships and Related Transactions, and Director Independence.
In October 2020, our sponsor paid $25,000, or approximately $0.002 per share, for 10,062,500 founder shares. The number of founder shares issued was determined based on the expectation that such founder shares would represent 20% of the outstanding shares upon completion of our initial public offering (excluding the placement units and underlying securities). The founder shares (including the Class A common stock issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder.
Our sponsor and Cantor purchased an aggregate of 800,000 placement units at a price of $10.00 per unit (450,000 placement units by our sponsor and 350,000 placement units by Cantor), for an aggregate purchase price of $8,000,000. There are no redemption rights or liquidating distributions from the trust account with respect to the founder shares, placement shares or placement warrants, which will expire worthless if we do not consummate a business combination by January 12, 2023.
Commencing on January 7, 2021, we pay First In Line Enterprises, Inc., an affiliate of members of our sponsor, a total of $15,000 per month for office space, utilities and secretarial and administrative support. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees. We may pay our sponsor or any of our existing officers or directors, or any entity with which they are affiliated, a finder’s fee, consulting fee or other compensation in connection with identifying, investigating and completing our initial business combination, which may be paid from the proceeds held in the trust account upon consummation of an initial business combination. These individuals and entities will be reimbursed for any
out-of-pocket expenses
incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee reviews on a quarterly basis all payments that were made to our sponsor, officers, directors, advisors or our or their affiliates and determines which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of
out-of-pocket expenses
incurred by such persons in connection with activities on our behalf.
 
35
On October 6, 2020, our sponsor agreed to loan us up to $300,000 to be used for a portion of the expenses of our initial public offering and we issued an unsecured promissory note to our sponsor. Pursuant to the terms of the promissory note, we could borrow up to an aggregate principal amount of $300,000. The promissory note was
non-interest
bearing and payable at the earlier of March 31, 2021 or the closing of our initial public offering, which occurred on January 12, 2021. The outstanding balance under the promissory note of $140,000 was repaid upon the closing of our initial public offering out of the $1,000,000 of offering proceeds that was allocated to the payment of offering expenses (other than underwriting commissions).
In addition, in order to 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 on a
non-interest bearing
basis as may be required. If we complete an initial business combination, we would repay such loaned amounts. In the event that the 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 units, at a price of $10.00 per unit at the option of the lender, upon consummation of our initial business combination. The units would be identical to the placement units. Other than as described above, the terms of such loans by our officers and directors, 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.
After our initial business combination, members of our management team who remain with us may be paid consulting, management or other fees from the combined company with any and all amounts being fully disclosed to our stockholders, to the extent then known, in the tender offer or proxy solicitation materials, as applicable, furnished to our stockholders. It is unlikely the amount of such compensation will be known at the time of distribution of such tender offer materials or at the time of a stockholder meeting held to consider our initial business combination, as applicable, as it will be up to the directors of the post-combination business to determine executive and director compensation.
Pursuant to a registration rights agreement, the holders of the founder shares, placement units, and units that may be issued upon conversion of working capital loans (and in each case holders of their component securities, as applicable) have registration rights to require us to register a sale of any of our securities held by them. These holders are entitled to make up to three demands, excluding short form registration demands, that we register such securities for sale under the Securities Act. In addition, these holders have “piggy-back” registration rights to include their securities in other registration statements filed by us.
We have entered into agreements with our officers and directors to provide contractual indemnification in addition to the indemnification provided for in our amended and restated certificate of incorporation. Our bylaws also permit us to secure insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Delaware law would permit such indemnification. We have purchased a policy of directors’ and officers’ liability insurance that insures our officers and directors against the cost of defense, settlement or payment of a judgment in some circumstances and insures us against our obligations to indemnify our officers and directors.
Related Party Policy
We have adopted a code of ethics requiring us to avoid, wherever possible, all conflicts of interests, except under guidelines or resolutions approved by our board of directors (or the appropriate committee of our board) or as disclosed in our public filings with the SEC. Under our code of ethics, conflict of interest situations will include any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) involving the company. We have filed a copy of our code of ethics with the SEC and a copy is available on our website. You are able to review our code of ethics by accessing our public filings at the SEC’s web site at www.sec.gov. In addition, a copy of the code of ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form
8-K.
 
36
In addition, our audit committee, pursuant to a written charter, is responsible for reviewing and approving related party transactions to the extent that we enter into such transactions. An affirmative vote of a majority of the members of the audit committee present at a meeting at which a quorum is present is required in order to approve a related party transaction. A majority of the members of the entire audit committee constitute a quorum. Without a meeting, the unanimous written consent of all of the members of the audit committee is required to approve a related party transaction. We have filed a copy of our audit committee charter with the SEC and a copy is available on our website. We also require each of our directors and executive officers to complete a directors’ and officers’ questionnaire that elicits information about related party transactions.
These procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents a conflict of interest on the part of a director, employee or officer.
To further minimize conflicts of interest, we have agreed not to consummate an initial business combination with an entity that is affiliated with any of our sponsor, officers or directors unless we, or a committee of independent directors, have obtained an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions that our initial business combination is fair to our company from a financial point of view.
We may pay our sponsor or any of our existing officers or directors, or any entity with which they are affiliated, a finder’s fee, consulting fee or other compensation in connection with identifying, investigating and completing our initial business combination, which may be paid from the proceeds held in the trust account upon consummation of an initial business combination. These individuals and entities may also receive the following payments, none of which will be made from the proceeds of our initial public offering held in the trust account prior to the completion of our initial business combination:
 
 
•
 
Repayment of up to an aggregate of $300,000 in loans made to us by our sponsor to cover offering-related and organizational expenses;
 
 
•
 
Payment to an affiliate of our sponsor of $15,000 per month, for up to 24 months, for office space, utilities and secretarial and administrative support;
 
 
•
 
Reimbursement for any
out-of-pocket expenses
related to identifying, investigating and completing an initial business combination; and
 
 
•
 
Repayment of
non-interest bearing
loans which may be made by our sponsor or an affiliate of our sponsor or certain of our officers and directors to finance transaction costs in connection with an intended initial business combination, the terms of which (other than as described above) have not been determined nor have any written agreements been executed with respect thereto. 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, upon consummation of our initial business combination. The units would be identical to the placement units.
Our audit committee reviews on a quarterly basis all payments that were made to our sponsor, officers, directors, advisors or our or their affiliates.
Director Independence
Nasdaq listing standards require that a majority of our board of directors be independent. An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Our board of directors has determined that Ms. Arnold and Ms. McJannet, Messrs. Flanagan and Sherman are “independent directors” as defined in the Nasdaq listing standards and applicable SEC rules. Our independent directors will have regularly scheduled meetings at which only independent directors are present.
 
Item 14
.
Principal Accountant Fees and Services.
The following is a summary of fees paid or to be paid to Withum, for services rendered.
Audit Fees
. During the year ended December 31, 2021 and for the period from September 28, 2020 (inception) through December 31, 2020, fees for our independent registered public accounting firm were approximately $41,200 and $55,260 for the services, respectively Withum performed in connection with our initial public offering and the audits of our December 31, 2021 and December 31, 2020 financial statements included in this Report.
 
 
37
Audit-Related Fees
. During the year ended December 31, 2021 and for the period from September 28, 2020 (inception) through December 31, 2020, Withum did not render assurance and related services related to the performance of the audit or review of financial statements.
Tax Fees
. During the year ended December 31, 2021, our independent registered public accounting firm did rendered services to us for tax compliance, tax advice and tax planning for the amount of $6,180. For the period from September 28, 2020 (inception) through December 31, 2020, our independent registered public accounting firm did not render services to us for tax compliance, tax advice and tax planning.
All Other Fees
. During the year ended December 31, 2021 and for the period from September 28, 2020 (inception) through December 31, 2020, there were no fees billed for products and services provided by our independent registered public accounting firm other than those set forth above.
Pre-Approval
Policy
Our audit committee was formed upon the consummation of our initial public offering. As a result, the audit committee did not
pre-approve
all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our board of directors. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will
pre-approve
all auditing services and permitted
non-audit
services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for
non-audit
services described in the Exchange Act which are approved by the audit committee prior to the completion of the audit).
 
38
PART IV
 
Item 15.
Exhibit and Financial Statement Schedules.
 
 
(1)
Financial Statements:
 
 
  
Page
 
  
 
F-2
 
  
 
F-3
 
  
 
F-4
 
  
 
F-5
 
  
 
F-6
 
  
 
F-7 to F-21
 
 
 
(2)
Financial Statement Schedules:
None.
 
 
(3)
Exhibits
We hereby file as part of this Report the exhibits listed in the attached Exhibit Index. Exhibits which are incorporated herein by reference can be inspected on the SEC website at www.sec.gov.
 
Item 16.
Form
10-K
Summary.
Not applicable.
 
39
EPIPHANY TECHNOLOY ACQUISITION CORP.
INDEX TO FINANCIAL STATEMENTS
 
  
 
F-2
 
Financial Statements:
  
  
 
F-3
 
  
 
F-4
 
  
 
F-5
 
  
 
F-6
 
  
 
F-7 to F-21
 
 
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of
Epiphany Technology Acquisition Corp.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Epiphany Technology Acquisition Corp. (the “Company”) as of December 31, 2021 and 2020, the related statements of operations, changes in stockholders’ (deficit) equity and cash flows for the year ended December 31, 2021 and the period from September 28, 2020 (inception) through December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the year ended December 31, 2021 and the period from September 28, 2020 (inception) through December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Restatement of Previously issued Financial Statement
As described in Note 2 to the financial statements, the Company’s previously issued January 12, 2021 financial statement has been restated herein to correct certain misstatements.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, if the Company is unable to raise additional funds to alleviate liquidity needs and complete a business combination by January 12, 2023 then the Company will cease all operations except for the purpose of liquidating. The date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/
s/
WithumSmith+Brown, PC
We have served as the Company’s auditor since 2020.
New York, New York
March
30
, 202
2

PCAOB ID Number 100
 
F-2
EPIPHANY TECHNOLOGY ACQUISITION CORP.
BALANCE SHEETS

                 
    
December 31,
    
December 31,
  
    
2021
    
2020
  
ASSETS
                 
Current Assets
                 
Cash
    $ 353,094     $ 10,027  
Prepaid expenses
      325,604       —    
    
 
 
    
 
 
  
Total Current Assets
      678,698       10,027  
Deferred offering costs
      —         184,973  
Investments held in Trust Account
      402,613,586       —    
    
 
 
    
 
 
  
TOTAL ASSETS
   
$
403,292,284
 
  
$
195,000
 
    
 
 
    
 
 
  
LIABILITIES, CLASS A COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION AND STOCKHOLDERS’ (DEFICIT) 
EQUITY
                 
Current Liabilities:
                 
Accounts payable and accrued expenses
    $ 307,293     $ 1,465  
Accrued offering costs
      —         30,000  
Advance from related parties
      1,000       —    
Promissory note – related party
      —         140,000  
    
 
 
    
 
 
  
Total Current Liabilities
      308,293       171,465  
Warrant liabilities
      10,262,500       —    
Deferred underwriting commissions
      15,137,500       —    
    
 
 
    
 
 
  
TOTAL LIABILITIES
   
 
25,708,293
 
  
 
171,465
 
    
 
 
    
 
 
  
Commitments and contingencies
                 
Class A, common stock subject to possible redemption, 40,250,000 and no shares
at $10.00 per share,
 
redemption

value as of December 31,
 
2021 and 2020, respectively
      402,500,000       —    
Stockholders’ (Deficit) Equity
                 
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding
      —         —    
Class A common stock, $0.0001 par value; 200,000,000 shares authorized,
 
800,000 and no shares issued and outstanding (excluding 40,250,000 and no shares subject to possible redemption) at December 31, 2021 and 2020, respectively
      80       —    
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 10,062,500 shares issued and outstanding- at December 31, 2021 and 2020
      1,006       1,006  
Additional
paid-in
capital
      —         23,994  
Accumulated deficit
      (24,917,095 )      (1,465 ) 
    
 
 
    
 
 
  
Total Stockholders’ (Deficit) Equity
   
 
(24,916,009
) 
  
 
23,535
 
    
 
 
    
 
 
  
LIABILITIES, CLASS A COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION AND STOCKHOLDERS’ (DEFICIT) 
EQUITY
   
$
403,292,284
 
  
$
195,000
 
    
 
 
    
 
 
  
The accompanying notes are an integral part of the financial statements.
 
F-3

EPIPHANY TECHNOLOGY ACQUISITION CORP.
STATEMENTS OF OPERATIONS
                 
    
Year Ended
December 31,
    
For the
Period from
September 28,
2020
(Inception)
through
December 31,
  
    
2021
    
2020
  
Formation and operational costs
    $ 1,192,548     $ 1,465  
    
 
 
    
 
 
  
Loss from operations
   
 
(1,192,548
) 
  
 
(1,465
) 
Other income:
                 
Interest earned on investments held in Trust Account
      113,586       —    
Change in fair value of warrant liabilities
      9,315,334       —    
Transaction cost related to warrant liability
      (1,029,081 )      —    
    
 
 
    
 
 
  
Total other income, net
      8,399,839       —    
Net income (loss)
   
$
7,207,291
 
  
$
(1,465
) 
    
 
 
    
 
 
  
Weighted average shares outstanding of Class A common stock
      39,700,411       —    
    
 
 
    
 
 
  
Basic and diluted net income (loss) per share of Class A common stock
   
$
0.14
 
  
$
—  
 
    
 
 
    
 
 
  
Weighted average shares outstanding of Class B common stock
      10,043,322       8,750,000  
    
 
 
    
 
 
  
Basic net income (loss) per share of Class B common stock
   
$
0.14
 
  
$
—  
 
    
 
 
    
 
 
  
Weighted average shares outstanding of Class B common stock
      10,062,500       —    
    
 
 
    
 
 
  
Diluted net income (loss) per share of Class B common stock
   
$
0.14
 
  
$
—  
 
    
 
 
    
 
 
  
The accompanying notes are an integral part of the financial statements.
 
F-4
EPIPHANY TECHNOLOGY ACQUISITION CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY
                                                         
    
Class A

Common Stock
     
Class B

Common Stock
     
Additional

Paid-in Capital
    
Accumulated

Deficit
    
Total

Stockholders’

Equity (Deficit)
  
    
Shares
     
Amount
     
Shares
     
Amount
                     
Balance – September 28, 2020 (inception)
   
 
—  
 
   
$
—  
 
   
 
—
 
   
$
—
 
   
 
—
 
  
 
—  
 
  
 
—
 
Issuance of Class B common stock to initial stockholders
 
 
—
 
 
$
—
 
 
 
10,062,500
 
 
$
1,006
 
 
 
23,994
 
 
 
—
 
 
 
25,000
 
Net loss
      —          —          —          —          —         (1,465 )      (1,465 ) 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
    
 
 
  
Balance – December 31, 2020
   
 
—  
 
   
$
—  
 
   
 
10,062,500
 
   
$
1,006
 
   
$
23,994
 
  
$
(1,465
) 
  
$
23,535
 
Sale of 800,000 Private Placement Units, net of warrant liability
      800,000        80        —          —          7,607,920       —         7,608,000  
Accretion for Class A common stock to redemption amount
      —          —          —          —          (7,631,914 )      (32,122,921 )      (39,754,835 ) 
Net income
      —          —          —          —          —         7,207,291       7,207,291  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
    
 
 
  
Balance – December 31, 2021
   
 
800,000
 
   
$
80
 
   
 
10,062,500
 
   
$
1,006
 
   
$
 —  
 
  
$
(24,917,095
) 
  
$
(24,916,009
) 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
    
 
 
  
The accompanying notes are an integral part of the financial statements.
 
F-5
EPIPHANY TECHNOLOGY ACQUISITION CORP.
STATEMENTS OF CASH FLOWS
                 
    
Year Ended
December 31,
    
For The
Period from
September 28,
2020
(Inception)
Through
December 31,
  
    
2021
    
2020
  
Cash Flows from Operating Activities:
                 
Net income (loss)
    $ 7,207,291     $ (1,465 ) 
Adjustments to reconcile net income (loss) to net cash used in operating activities:
                 
Change in fair value of warrant liabilities
      (9,315,334 )      —    
Interest earned on investments held in Trust Account
      (113,586 )      —    
Transaction costs allocated to warrants
      1,029,081       —    
Changes in operating assets and liabilities:
                 
Prepaid expenses
      (325,604 )      —    
Accounts payable and accrued expenses
      305,828       1,465  
    
 
 
    
 
 
  
Net cash used in operating activities
   
 
(1,212,324
) 
  
 
—  
 
    
 
 
    
 
 
  
Cash Flows from Investing Activities:
                 
Investment of cash into trust Account
      (402,500,000 )      —    
    
 
 
    
 
 
  
Net cash used in investing activities
   
 
(402,500,000
) 
  
 
—  
 
    
 
 
    
 
 
  
Cash Flows from Financing Activities:
                 
Proceeds from issuance of Class B common stock to Sponsor
      —         25,000  
Proceeds from sale of Units, net of underwriting discounts paid
      396,500,000       —    
Proceeds from sale of Private Placement Units
      8,000,000       —    
Advance from related party
      1,000       —    
Repayment of promissory note – related party
      (140,000 )      —    
Proceeds from promissory note—related party
      —         140,000  
Payment of offering costs
      (305,609 )      (154,973 ) 
    
 
 
    
 
 
  
Net cash provided by financing activities
   
 
404,055,391
 
  
 
10,027
 
    
 
 
    
 
 
  
Net Change in Cash
   
 
343,067
 
  
 
10,027
 
Cash – Beginning of period
      10,027       —    
    
 
 
    
 
 
  
Cash – End of period
   
$
353,094
 
  
$
10,027
 
    
 
 
    
 
 
  
Non-Cash
investing and financing activities:
                 
Offering costs included in accrued offering costs
    $ —       $ 30,000  
    
 
 
    
 
 
  
Deferred underwriting fee payable
    $ 15,137,500     $ —    
    
 
 
    
 
 
  
The accompanying notes are an integral part of the financial statements.
 
F-6
EPIPHANY TECHNOLOGY ACQUISITION CORP.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Epiphany Technology Acquisition Corp. (the “Company”) was incorporated in Delaware on September 28, 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 not limited to a particular industry or sector for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with
early
stage and emerging growth companies
.
As of December 31, 2021, the Company had not commenced any operations. All activity for the period from September 28, 2020 (inception) through December 31, 2021 relates to the Company’s formation and the initial public offering (“Initial Public Offering”), which is described below, identifying a target company for a 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 from the proceeds derived from the Initial Public Offering.
The registration statement for the Company’s Initial Public Offering was declared effective on January 7, 2021. On January 12, 2021 the Company consummated the Initial Public Offering of 40,250,000 units (the “Units” and, with respect to the Class A common stock included in the Units sold, the “Public Shares”), which includes the full exercise by the underwriter of its over-allotment option in the amount of 5,250,000 Units, at $10.00 per Unit, generating gross proceeds of $402,500,000 which is described in Note 4.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 800,000 units (the “Placement Units”) at a price of $10.00 per Placement Unit in a private placement to Epiphany Technology Sponsor LLC. (the “Sponsor”) and Cantor Fitzgerald & Co. (“Cantor”), that closed simultaneously with the Initial Public Offering, generating gross proceeds of $8,000,000, which is described in Note 5
.
Transaction costs amounted to $21,598,082, consisting of $6,000,000 in cash underwriting fees, net of $1,000,000 reimbursed from the underwriters (see Note
7
), $15,137,500 of deferred underwriting fees and $460,582 of other offering costs.
Following the closing of the Initial Public Offering on January 12, 2021, an amount of $402,500,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Placement Units was placed in a trust account (the “Trust Account”), located in the United States and is invested only 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 any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of
Rule 2a-7
of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account, as described below.
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 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 complete a Business Combination successfully. The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding deferred underwriting commissions and taxes payable on interest earned on the Trust Account) at the time of the agreement to enter into the initial Business Combination. The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
The Company will provide its holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
 
F-
7
The Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 either immediately prior to or upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Certificate of Incorporation (the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Company’s Sponsor has agreed to vote its Founder Shares (as defined in Note 6), Placement Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction.
If the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the 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”)), is 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, Placement Shares and Public Shares held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Certificate of Incorporation (i) that would affect the substance or timing of the Company’s obligation to allow redemptions in connection with a Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination or (ii) with respect to any other provision relating to stockholders’ rights or
pre-business
combination activity, unless the Company provides the Public Stockholders with the opportunity to redeem its Public Shares in conjunction with any such amendment.
The Sponsor has agreed to waive its liquidation rights with respect to the Founder Shares and Placement Shares if the Company fails to complete a Business Combination by January 12, 2023 (the “Combination Period”). However, if the Sponsor acquire Public Shares in or after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period.
If the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) above to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
 
F-8
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 (i) $10.00 per Public Share or (ii) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except for the Company’s independent registered accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Going Concern
In connection with the Company’s assessment of going concern considerations in accordance with FASB’s 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 as well as complete a Business Combination by January 12, 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. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after January 12, 2023.
NOTE 2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
The Company previously accounted for its outstanding Public Warrants (as defined in Note 4) and Private Placement Warrants (as defined in Note 5, collectively, with the Public Warrants, the “Warrants”) issued in connection with its Initial Public Offering as components of equity instead of as derivative liabilities. The warrant agreement governing the Warrants includes a provision that provides for potential changes to the settlement amounts dependent upon the characteristics of the holder of the warrant. In addition, the warrant agreement includes a provision that in the event of a tender offer or exchange offer made to and accepted by holders of more
than 50% of the outstanding shares of a single class of shares, all holders of the Warrants would be entitled to receive cash for their Warrants (the “tender offer provision”).
The Company’s management further evaluated the Warrants under Accounting Standards Codification (“ASC”) Subtopic
815-40,
Contracts in Entity’s Own Equity. ASC
Section 815-40-15
addresses equity versus liability treatment and classification of equity-linked financial instruments, including warrants, and states that a warrant may be classified as a component of equity only if, among other things, the warrant is indexed to the issuer’s common stock. Under ASC
Section 815-40-15,
a warrant is not indexed to the issuer’s common stock if the terms of the warrant require an adjustment to the exercise price upon a specified event and that event is not an input to the fair value of the warrant. Based on management’s evaluation, the Company’s audit committee, in consultation with management, concluded that the Company’s Private Placement Warrants are not indexed to the Company’s shares of common stock in the manner contemplated by ASC
Section 815-40-15
because the holder of the instrument is not an input into the pricing of a
fixed-for-fixed
option on equity shares. In addition, based on management’s evaluation, the Company’s audit committee, in consultation with management, concluded that the tender offer provision fails the “classified in shareholders’ equity” criteria as contemplated by ASC
Section 815-40-25.
As a result of the above, the Company should have classified the Warrants as derivative liabilities. Under this accounting treatment, the Company is required to measure the fair value of the Warrants at the end of each reporting period as well as
re-evaluate
the treatment of the warrants and recognize changes in the fair value from the prior period in the Company’s operating results for the current period. The restatement resulted in a $19,577,834 increase in the Company’s Warrant Liability as of January 12, 2021. Transaction costs of the Initial Public Offering of $1,029,521 were allocated to expense associated with the warrant liability which are reflected in the change to the Accumulated Deficit line item.
 
F-9
In connection with the preparation of the Company’s financial statements as of September 30, 2021, management identified errors made in its historical financial statement where, at the closing of the Company’s Initial Public Offering, the Company improperly valued its shares of common stock subject to possible redemption. The Company previously determined the shares of common stock subject to possible redemption to be equal to the redemption value of $10.00 per share, while also taking into consideration a redemption cannot result in net tangible assets being less than $5,000,001. Management determined that the common shares issued during the Initial Public Offering can be redeemed or become redeemable subject to the occurrence of future events considered outside of the Company’s control. Therefore, management concluded that the redemption value should include all shares of common stock subject to possible redemption, resulting in the common shares subject to possible redemption being equal to their redemption value. As a result, management has noted a reclassification error related to temporary equity and permanent equity. This resulted in a restatement adjustment to the initial carrying value of the shares of common stock subject to possible redemption with the offset recorded to additional
paid-in
capital (to the extent available), accumulated deficit and shares of common stock.
In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the changes and has determined that the related impact was material to the previously issued audited balance sheet included in the Company’s Current Report on Form
8-K
as of January 12, 2021, filed with the SEC on January 19, 2021 (the “Affected Financial Statement”) and such the Affected Financial Statement should no longer be relied upon. Therefore, the Company, in consultation with its Audit Committee, concluded that its Affected Financial Statement should be restated to classify the warrants as derivative liabilities and report all Public Shares as temporary equity. As such the Company is reporting this restatement to the Affected Financial Statement in this Current Report on Form 10K. Please see Notes 3, Note 9 and Note 11, which have been updated to reflect the restatement of the financial statements contained in this within.
The impact of the restatement on the Company’s balance sheet is reflected in the following table: 
 
Balance Sheet as of January 12, 2021
  
As
 
Previously
Reported IPO
 
 
Warrant
Adjustment
 
 
As Revised
 
 
Temp Equity
Adjustment
 
 
As Restated
 
Warrant
L
iabilities
    $ —        $ 19,577,834      $ 19,577,834  
 
$
—
 
 
$
 19,577,834
 
Total
L
iabilities
    $ 15,137,965      $ 19,577,834      $ 34,715,799  
 
$
 —
 
 
$
 34,715,799
 
Class A ordinary shares subject to possible redemption
    $ 383,925,450      $ (19,577,840 )    $ 364,347,610  
 
$
 38,152,390

 
$
402,500,000
 
Class A ordinary shares
    $ 266      $ 196      $ 462  
 
$
 (382
)
 
 
$
80
 
Additional paid-in capital
    $ 5,000,196      $ 1,028,891      $ 6,029,087    
 
$
 (6,029,087
)
 
$
—
 
Accumulated deficit
    $ (1,465 )     $ (1,029,081 )     $ (1,030,546 ) 
 
$
 (32,122,921
)
 
 
$
(33,153,467
)
 
Total shareholders’ equity (deficit)
    $ 5,000,003      $ —      $ 5,000,003  
 
$
 (38,152,390
)
 
 
$
(33,152,387
)
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC.
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 of 2002, 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.
 
F-
10
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to
non-emerging
growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of 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 financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future events. One of the more significant accounting estimates included in these financial statements is the determination of the fair value of the warrant liability. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of December 31, 2021 and 2020.
Investments Held in Trust Account
At December 31, 2021, substantially all of the assets held in the Trust Account were held in Treasury bills, accounted for as
held-to-maturity
securities, and money market funds, which are invested primarily in U.S. Treasury securities and accounted for as treasury securities.
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 a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ (deficit) equity section of the Company’s balance sheets. We recognize changes in redemption value immediately as they occur and adjusts the carrying value of the Class A common stock subject to possible redemption to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security.
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. Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable Class A common stock resulted in charges against additional
paid-in
capital and accumulated deficit.
 
F-11
At December 31, 2021, the Class A common stock reflected in the balance sheets are reconciled in the following table:
 
 
 
 
 
 
Gross proceeds
    $ 402,500,000  
Less:
         
Proceeds allocated to Public Warrants
      (19,185,834 ) 
Class A common stock issuance costs
      (20,569,001 ) 
Plus:
         
Accretion of carrying value to redemption value
      39,754,835  
    
 
 
  
Class A common stock subject to possible redemption
    $ 402,500,000  
    
 
 
  
Offering Costs
Offering costs consisted of legal, accounting and other expenses incurred through the Initial Public Offering 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 allocated to warrant liabilities were expensed as incurred in the statements of operations. Offering costs associated with the Class A common stock issued were initially charged to temporary equity and then accreted to common stock subject to redemption upon the completion of the Initial Public Offering. Offering costs amounted to $21,598,082, of which $20,569,001 were charged to temporary equity upon the completion of the Initial Public Offering and $1,029,081 were expensed to the statements of operations.
Warrant Liability
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 ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The Company accounts for its Warrants in accordance with the guidance contained in ASC 815-40 under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Warrants as liabilities at their fair value and adjusts the Warrants to fair value at each reporting period. This liability is subject to
re-measurement
at each balance sheets date until exercised, and any change in fair value is recognized in the Company’s statements of operations. The fair value of the Placement Warrants (as defined in Note 5) was determined using a binomial lattice model incorporating the
Cox-Ross-Rubenstein
methodology. The Public Warrants (as defined in Note 4) for periods where no observable traded price was available are valued using a binomial lattice model incorporating the
Cox-Ross-Rubenstein
methodology. For periods subsequent to the detachment of the Public Warrants from the Units, the Public Warrant quoted market price was used as the fair value as of each relevant date.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
The Company’s taxable income primarily consists of interest income on the Trust Account. The Company’s general and administrative costs are generally considered
start-up
costs and are not currently deductible. The Company did not record an income tax provision during the year ended December 31, 2021 and period-ended December 31, 2020. The Company’s effective tax rate of
0
% for the year ended December 31, 2021 and period-ended December 31, 2020 differs from the expected income tax rate due to the
start-up
costs (discussed above), which are not currently deductible, and to permanent differences primarily attributable to the change in the fair value of the warrant liabilities.
 
F-12
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2021 and 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
Net Loss Per Common Share
The Company complies with accounting and disclosure requirements of Financial Accounting Standards Board’s (“FASB”) ASC Topic 260, “Earnings Per Share”. The Company has two classes of common stock, which are referred to as Class A common stock and Class B common stock. Net income (loss) per common stock is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Income and losses are shared pro rata between the two classes of shares. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per common share as the redemption value approximates fair value.
The calculation of diluted income (loss) per share does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants are exercisable to purchase 13,683,334 shares Class A common stock in the aggregate. As of December 31, 2021, the Company had 1,312,500 Class B common stock which were no longer subject to forfeitures that were included in the calculation for dilutive earning per shares. As of December 31, 2020, the Company did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into common shares and then share in the earnings of the Company. As a result, diluted net income (loss) per common share is the same as basic net loss per common stock for the periods presented.
The following table reflects the calculation of basic and diluted net income (loss) per common share (in dollars, except per share amounts):
                                 
    
Year Ended

December 31, 2021
     
For The

Period from September

28, 2020 (Inception)
Through December 31,
2020
  
    
Class A
     
Class B
     
Class A
     
Class B
  
Basic net income (loss) per common stock
                                    
Numerator:
                                    
Allocation of net income (loss), as adjusted
    $ 5,752,130      $ 1,455,161      $ —        $ (1,465 ) 
Denominator:
                                    
Basic weighted average shares outstanding
      39,700,411        10,043,322        —          8,750,000  
    
 
 
     
 
 
     
 
 
     
 
 
  
Basic net income (loss) per common stock
    $ 0.14      $ 0.14      $ —        $ (0.00 ) 
    
 
 
     
 
 
     
 
 
     
 
 
  
 
F-13
    
Year Ended

December 31, 2021
     
For The

Period from September
28, 2020 (Inception)
Through December 31,
2020
  
    
Class A
     
Class B
     
Class A
     
Class B
  
Diluted net income (loss) per common stock
                                    
Numerator:                                    
Allocation of net income (loss), as adjusted
    $ 5,749,913      $ 1,457,378      $ —        $ —    
Denominator:
                                    
Diluted weighted average shares outstanding
      39,700,411        10,062,500        —          —    
    
 
 
     
 
 
     
 
 
     
 
 
  
Diluted net income (loss) per common stock
    $ 0.14      $ 0.14      $ —        $ —    
    
 
 
     
 
 
     
 
 
     
 
 
  
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations 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 had not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the Company’s balance sheets, primarily due to their short-term nature, except for the Warrants (see Note 1
1
).
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board 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 evaluating the impact of adoption of ASU
2020-06.
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
NOTE 4 — INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold 40,250,000 Units which includes a full exercise by the underwriters of their over-allotment option in the amount of 5,250,000 Units, at a price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and
one-third
of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 8).
NOTE 5 — PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor and Cantor purchased an aggregate of 800,000 Placement Units, at a price of $10.00 per Placement Unit, for an aggregate purchase price of $8,000,000, in a private placement. The Sponsor purchased 450,000 Placement Units and Cantor purchased 350,000 Placement Units. Each Placement Unit consists of one share of Class A common stock (“Placement Share” or, collectively, “Placement Shares”) and
one-third
of one redeemable warrant (each, a “Placement Warrant”). Each whole Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share. A portion of the proceeds from the Placement Units were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Placement Units will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Placement Units and all underlying securities will expire worthless.
 
F-14
NOTE 6 — RELATED PARTY TRANSACTIONS
Founder Shares
On October 6, 2020, the Sponsor paid an aggregate of $25,000 in consideration for 10,062,500 shares of the Company’s Class B common stock (the “Founder Shares”). The Founder Shares included an aggregate of up to 1,312,500 shares that were subject to forfeiture. As a result of the underwriters’ election to fully exercise their over-allotment option, no Founder Shares are currently subject to forfeiture.
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination or (B) subsequent to a Business Combination, (x) if the last sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading
day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Administrative Services Agreement
The Company entered into an agreement, commencing on January 7, 2021 through the earlier of the Company’s consummation of a Business Combination and its liquidation, to pay an affiliate of the Sponsor a total of $15,000 per month for office space, utilities and secretarial and administrative support services. For the year ended December 31, 2021 and for the period from September 28, 2020 (inception) through December 31, 2020, the Company incurred $180,000 and $0 in fees for such services, respectively. At December 31, 2021, fees amounting to $15,000 are included in accounts payable and accrued expenses in the accompanying balance sheets. There were no amounts accrued as of December 31, 2020.
Promissory Note — Related Party
On September 28, 2020, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Note”). The Note was
non-interest
bearing and was payable on the earlier of (i) March 31, 2021 or (ii) the consummation of the Initial Public Offering. As of December 31, 2020, the Note had an outstanding balance of $140,000. The outstanding balance was repaid at the closing of the Initial Public Offering on January 12, 2021. As of December 31, 2021, the Note is no longer available to withdraw from.
Related Party Loans
In addition, 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 officers and directors 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 $1,500,000 of such Working Capital Loans may be convertible into units upon consummation of the Business Combination at a price of $10.00 per unit. The units would be identical to the Placement Units. As of December 31, 2021 and 2020, there were no amounts outstanding under the Working Capital Loans.
Advance from Related Party
During February 2021, The Sponsor advanced the Company an aggregate of $1,000 to cover expenses related to franchise fee and formation costs. The advances are
non-interest
bearing and due on demand and are expected to be paid back within the year.
 
F-15
NOTE 7 — COMMITMENTS AND CONTINGENCIES
Risks and Uncertainties
Management continues to evaluate the impact of global events, including the
COVID-19
global pandemic and anticipated or current military conflict, including between Russia and Ukraine, terrorism, sanctions, or other geopolitical events has concluded that while it is reasonably possible that the events could have a negative effect on the Company’s financial position, its results of operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Registration and Stockholder Rights
Pursuant to a registration rights agreement entered into on January 7, 2021, the holders of the Founder Shares, Placement Units, Placement Shares, Placement Warrants and units that may be issued upon conversion of Working Capital Loans and the shares and warrants included therein (and any shares of common stock issuable upon the exercise of the Placement Warrants or warrants included in the units issued upon conversion of Working Capital Loans) will be entitled to registration rights requiring the Company register such securities for resale (in the case of the Founder Shares, only after conversion to our Class A common stock). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company 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 and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering the securities. Notwithstanding the foregoing, Cantor may not exercise its demand and “piggyback” registration rights after five (5) and seven (7) years after January 7, 2021 and may not exercise its demand rights on more than one occasion. 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 underwriters are entitled to a deferred fee of (i) 3.5% of the gross proceeds of the initial 35,000,000 Units sold in the Initial Public Offering, or $12,250,000, and (ii) 5.5% of the gross proceeds from the Units sold pursuant to the over-allotment option, or $2,887,500. The deferred fee will be paid in cash upon the closing of a Business Combination from the amounts held in the Trust Account, subject to the terms of the underwriting agreement.
The underwriters reimbursed the Company $1,000,000 at the closing of the Initial Public Offering for offering costs incurred.
NOTE 8 — STOCKHOLDERS’ EQUITY
Preferred Stock
 — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At December 31, 2021 and 2020, there were no shares of preferred stock issued or outstanding.
Class
 A Common Stock
 — The Company is authorized to issue 200,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of Class A common stock are entitled to one vote for each share. At December 31, 2021, there were 800,000 shares of Class A common stock issued and outstanding, excluding 40,250,000 shares of Class A common stock subject to possible redemption which are presented as temporary equity. At December 31, 2020, there were no shares of Class A common stock issued and outstanding.
Class
 B Common Stock
 — The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of Class B common stock are entitled to one vote for each share. At December 31, 2021 and 2020, there were 10,062,500 shares of Class B common stock issued and outstanding.
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 required by law.
 
F-16
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, 20% of the sum of the total number of all shares of common stock outstanding upon completion of the Initial Public Offering (excluding the Placement Units and underlying securities) plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with a Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in a Business Combination, any private placement-equivalent units and their underlying securities issued to the Sponsor or its affiliates upon conversion of loans made to the Company). The Company cannot determine at this time whether a majority of the holders of the Class B common stock at the time of any future issuance would agree to waive such adjustment to the conversion ratio.
NOTE 9 — WARRRANT LIABILITIES
At December 31, 2021, there were 13,416,667
Public Warrants outstanding. The Company had no Public Warrants outstanding for the period ended December 31, 2020. Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon the exercise of the warrants is then effective and a current prospectus relating to those shares of Class A common stock is available, 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 20 business days after the closing of a Business Combination, the Company will use its best efforts to file with the SEC a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants, to cause such registration statement to become effective 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. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60
th
business day after 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 will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the foregoing, if a registration statement covering the Class A common stock issuable upon exercise of the warrants is not effective within a specified period following the consummation of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act of 1933, as amended, or the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.
Once the warrants become exercisable, the Company may redeem the Public Warrants:
 
  •  
in whole and not in part;
 
  •  
at a price of $0.01 per warrant;
 
  •  
upon not less than 30 days’ prior written notice of redemption, or the
30-day
redemption period, to each warrant holder; and
 
  •  
if, and only if, the reported last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a
30-trading
day period commencing once the warrants become exercisable and ending three business days before the Company sends the notice of redemption to the warrant holders.
 
F-17

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, 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. However, the warrants will not be adjusted for issuance 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 warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the Company’s initial Business Combination on the date of the consummation of such initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of the Market Value and the Newly Issued Price and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the greater of the Market Value and the Newly Issued Price.
At December 31, 2021, there were 266,667
Placement Warrants outstanding. The Company had no Placement Warrants outstanding for the period ended December 31, 2020. The Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Placement Warrants and the Class A common stock issuable upon the exercise of the Placement Warrants will not be transferable, assignable or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Placement Warrants will be exercisable on a cashless basis and be
non-redeemable
so long as they are held by the initial purchasers or their permitted transferees. If the Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
NOTE 10 — INCOME TAX
The Company’s net deferred tax assets at December 31, 2021 and 2020 is as follows:
 
 
 
 
 
 
 
 
 
 
    
December 31,
     
December 31,
  
    
2021
     
2020
  
Deferred tax asset (liability)
                  
Net operating loss carryforward
    $ 18,487      $ 308  
Startup/Organization Expenses
      208,403        —    
    
 
 
     
 
 
  
Total deferred tax assets, net
      226,890        308  
Valuation Allowance
      (226,890 )       (308 ) 
    
 
 
     
 
 
  
Deferred tax liability, net of valuation allowance
    $ —        $ —    
    
 
 
     
 
 
  
 
F-18
The income tax provision for the year ended December 31, 2021 and for the period from September 28, 2020 (inception) through December 31, 2020 consists of the following:
 
 
 
 
 
 
 
 
 
 
    
December 31,
     
December 31,
  
    
2021
     
2020
  
Federal
                  
Current
    $ —        $ —    
Deferred
      (226,582 )       (308 ) 
State and Local
                  
Current
      —          —    
Deferred
      —          —    
Change in valuation allowance
      226,582        308  
    
 
 
     
 
 
  
Income tax provision
    $ —        $ —    
    
 
 
     
 
 
  
As of December 31, 2021 and 2020, the Company had $88,033 and $1,465 of U.S. federal net operating loss carryovers available to offset future taxable income.
In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. For the year ended December 31, 2021 and for the period from September 28, 2020 (inception) through December 31, 2020, the change in the valuation allowance was $226,274 and $308, respectively.
A reconciliation of the federal income tax rate to the Company’s effective tax rate at December 31, 2021 and 2020 is as follows:
 
 
 
 
 
 
 
 
 
 
    
December 31,
2021
    
December 31,
2020
  
                  
Statutory federal income tax rate
      21.0 %      21.0 % 
State taxes, net of federal tax benefit
      0.0 %      0.0 % 
Change in fair value of warrants
      (27.1 )%      0.0 % 
Transaction costs allocated to warrants
      3.0 %      0.0 % 
Change in valuation allowance
      3.1 %      (21.0 )% 
    
 
 
    
 
 
  
Income tax provision
      0.0 %      0.0 % 
    
 
 
    
 
 
  
The Company files income tax returns in the U.S. federal jurisdiction and is subject to examination by the various taxing authorities. The Company’s tax returns since inception remain open to examination by the taxing authorities.
NOTE 11 — FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for its financial assets and liabilities that arere-measured and reported at fair value at each reporting period, and
non-financial
assets and liabilities that
are re-measured
and reported at fair value at least annually.
 
F-19
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
 
Level 1:
  
Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
   
Level 2:
  
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
   
Level 3:
  
Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
The Company classifies its U.S. Treasury and equivalent securities as
held-to-maturity
in accordance with ASC Topic 320 “Investments—Debt and Equity Securities.”
Held-to-maturity
securities are those securities which the Company has the ability and intent to hold until maturity.
Held-to-maturity
treasury securities are recorded at amortized cost on the accompanying balance sheets and adjusted for the amortization or accretion of premiums or discounts.
At December 31, 2021, assets held in the Trust Account were comprised of $201,269,466 in money market funds, which are invested in U.S. Treasury Securities. The Company also had $1,120 in cash and $201,343,000 invested in U.S. Treasury Bills. Total investment in marketable securities as of December 31, 2021 is $402,613,586
. During the year ended December 31, 2021, the Company did not withdraw any interest income from the Trust Account to pay its taxes. During the period ended December 31, 2020 the Company did not hold any assets in a trust account.
The following table presents information about the Company’s gross holding gains and fair value of
held-to-maturity
securities at December 31, 2021:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    
Held-To-Maturity
   
Level
     
Amortized

Cost
     
Gross

Holding

Gain

(Loss)
     
Fair Value
  
December 31, 2021
   
U.S. Treasury Securities
(Matures on 01/13/2022)
      1      $ 201,343,000      $ —        $ 201,343,000  
         
 
 
     
 
 
     
 
 
     
 
 
  
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
 
 
 
 
 
 
 
 
 
 
Description
   
Level
     
December 31,

2021
  
Assets:
                  
Investments – Money market funds
      1      $ 201,269,466  
Liabilities:
                  
Warrant Liability – Public Warrants
      1      $ 10,062,500  
Warrant Liability – Private Placement Warrants
      3      $ 200,000  
The Warrants were accounted for as liabilities in accordance with ASC
815-40
and are presented within warrant liabilities in the Company’s balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the statements of operations.
The Private Placement Warrants were valued using a binomial lattice model incorporating the
Cox-Ross-Rubenstein
methodology, which is considered to be a Level 3 fair value measurement, as of initial measurement and subsequent measurements. The primary unobservable input utilized in determining the fair value of the Warrants is the expected volatility of the common stock. The expected volatility was initially derived from observable public warrant pricing on comparable ‘blank-check’ companies without an identified target. The subsequent measurements of the Public Warrants after the detachment of the Public Warrants from the Units was classified as Level 1 due to the use of an observable market quote in an active market. For periods subsequent to the detachment of the Public Warrants from the Units, the close price of the Public Warrant price was used as the fair value as of each relevant date.
 
F-20
The following table presents the quantitative information regarding Level 3 fair value measurements:
 
Input:
  
December 31,

2021
 
Risk-free interest rate
      1.18 % 
Expected term (years)
      5.5  
Expected volatility
      14.5 % 
Exercise price
    $ 11.50  
Stock price
    $ 9.76  
The following table presents the changes in the fair value of Level 3 warrant liabilities:
 
 
  
Private
Placement
 
  
Public
 
  
Warrant
Liabilities
(Level 3)
 
Fair value as of
December 31, 2020
  
$
—
  
 
  
$
—
  
 
  
$
—
  
 
Initial classification on January 12, 2021 (Initial Public Offering)
      392,000        19,185,834        19,577,834  
Transfers to Level 1
      —          (14,892,500 )       (14,892,500 ) 
Change in fair value
      (192,000 )       (4,293,334 )       (4,485,334 ) 
    
 
 
     
 
 
     
 
 
  
Fair value as of December 31, 2021
   
$
200,000
 
   
$
—  
 
   
$
200,000
 
    
 
 
     
 
 
     
 
 
  
Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 1 fair value measurement during the year ended December 31, 2021 was
$14,892,000
. There were no transfers to/from Levels 1, 2, and 3 during the year ended December 31, 202
0
.
NOTE 12 — SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Other than as described in these financial statements and below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
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. 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.
 
F-
21
EXHIBIT INDEX
 
Exhibit No.
  
Description
1.1
  
3.1
  
3.2
  
4.1
  
4.2
  
4.3
  
4.4
  
4.5
  
10.1
  
10.2
  
10.3
  
10.4
  
10.5
  
10.6
  
10.7
  
31.1
  
31.2
  
32.1
  
32.2
  
101.INS
  
Inline XBRL Instance Document*
101.SCH
  
Inline XBRL Taxonomy Extension Schema*
101.CAL
  
Inline XBRL Taxonomy Calculation Linkbase*
101.LAB
  
Inline XBRL Taxonomy Label Linkbase*
101.PRE
  
Inline XBRL Definition Linkbase Document*
101.DEF
  
Inline XBRL Definition Linkbase Document*
104
  
Cover Page Interactive Data File (embedded within the Inline XBRL document)
*
 
*
Filed herewith.
**
Furnished herewith.
(1)
Incorporated by reference to the Company’s Form
S-1,
filed with the SEC on December 15, 2020.
(2)
Incorporated by reference to the Company’s Form
S-1/A,
filed with the SEC on December 30, 2020.
(3)
Incorporated by reference to the Company’s Form
8-K,
filed with the SEC on January 13, 2021.
(4)
Incorporated by reference to the Company’s Form
10-K,
filed with the SEC on March 26, 2021.
 
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
 
March
30
, 2022
  
Epiphany Technology Acquisition Corp.
  
By:
  
/s/ Peter Bell
  
Name:
  
Peter Bell
  
Title:
  
Chief Executive Officer and Chief Financial Officer
  
  
(Principal Executive Officer and Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
Name
  
Position
  
Date
/s/ Peter Bell
  
Chief Executive Officer, Chief Financial Officer and Director
  
March
30
, 2022
Peter Bell
  
(Principal Executive Officer and Principal Financial and Accounting Officer)
  
/s/ Arthur Coviello
  
Chairman of the Board
  
March
30
, 2022
Arthur Coviello
  
  
/s/ Paul Deninger
  
Vice Chairman of the Board
  
March
30
, 2022
Paul Deninger
  
  
/s/ Kirk Arnold
  
Director
  
March
30
, 2022
Kirk Arnold
  
  
/s/ Paul Flanagan
  
Director
  
March
30
, 2022
Paul Flanagan
  
  
/s/ Melissa McJannet
  
Director
  
March
30
, 2022
Melissa McJannet
  
  
/s/ JD Sherman
  
Director
  
March
30
, 2022
JD Sherman
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