Item
1. Condensed Financial Statements
COMPUTE
HEALTH ACQUISITION CORP.
CONDENSED
BALANCE SHEETS
| |
June 30,
2022 | | |
December 31,
2021 | |
| |
(unaudited) | | |
| |
Assets: | |
| | |
| |
Current assets: | |
| | |
| |
Cash and cash equivalents | |
$ | 66,794 | | |
$ | 836,874 | |
Prepaid expenses | |
| 470,608 | | |
| 774,677 | |
Total current assets | |
| 537,402 | | |
| 1,611,551 | |
Investments held in Trust Account | |
| 863,845,224 | | |
| 862,549,773 | |
Total Assets | |
$ | 864,382,626 | | |
$ | 864,161,324 | |
| |
| | | |
| | |
Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit: | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable | |
$ | 10,890 | | |
$ | 8,047 | |
Accrued expenses | |
| 2,000 | | |
| 162,917 | |
Franchise tax payable | |
| 20,000 | | |
| 200,045 | |
Income tax payable | |
| 219,373 | | |
| - | |
Total current liabilities | |
| 252,263 | | |
| 371,009 | |
Derivative warrant liabilities | |
| 7,567,080 | | |
| 30,268,330 | |
Deferred underwriting commissions | |
| 30,187,500 | | |
| 30,187,500 | |
Promissory note – related party | |
| 1,391,290 | | |
| 1,392,950 | |
Deferred legal costs | |
| 1,471,696 | | |
| 957,588 | |
Total liabilities | |
| 40,869,829 | | |
| 63,177,377 | |
| |
| | | |
| | |
Commitments and Contingencies | |
| | | |
| | |
| |
| | | |
| | |
Class A common stock subject to possible redemption, $0.0001 par value; 86,250,000 shares issued and outstanding at $10.01 per share redemption value at June 30, 2022 and December 31, 2021 | |
| 863,225,192 | | |
| 862,500,000 | |
| |
| | | |
| | |
Stockholders’ Deficit: | |
| | | |
| | |
Preferred stock, $0.0001 par value; 3,000,000 shares authorized; none issued or outstanding at June 30, 2022 and December 31, 2021 | |
| - | | |
| - | |
Class A common stock, $0.0001 par value; 300,000,000 shares authorized ; no non-redeemable shares issued or outsanding at June 30, 2022 and December 31, 2021 | |
| - | | |
| - | |
Class B common stock, $0.0001 par value; 30,000,000 shares authorized; 21,562,500 shares issued and outstanding at June 30, 2022 and December 31, 2021 | |
| 2,156 | | |
| 2,156 | |
Additional paid-in capital | |
| - | | |
| - | |
Accumulated deficit | |
| (39,714,551 | ) | |
| (61,518,209 | ) |
Total stockholders’ deficit | |
| (39,712,395 | ) | |
| (61,516,053 | ) |
Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit | |
$ | 864,382,626 | | |
$ | 864,161,324 | |
The
accompanying notes are an integral part of these condensed financial statements.
COMPUTE
HEALTH ACQUISITION CORP.
UNAUDITED
CONDENSED STATEMENTS OF OPERATIONS
| |
For the Three Months
Ended June 30, | | |
For the Six Months
Ended June 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
General and administrative expenses | |
$ | 616,731 | | |
$ | 663,775 | | |
$ | 1,150,155 | | |
$ | 1,007,510 | |
Franchise tax expenses | |
| 50,000 | | |
| 49,315 | | |
| 100,000 | | |
| 97,589 | |
Loss from operations | |
| (666,731 | ) | |
| (713,090 | ) | |
| (1,250,155 | ) | |
| (1,105,099 | ) |
Other income (expense) | |
| | | |
| | | |
| | | |
| | |
Change in fair value of derivative warrant liabilities | |
| 9,453,450 | | |
| (9,802,990 | ) | |
| 22,701,250 | | |
| (13,195,740 | ) |
Change in fair value of promissory note – related party | |
| (39,930 | ) | |
| (145,180 | ) | |
| 1,660 | | |
| (145,180 | ) |
Loss on promissory note - related party | |
| - | | |
| (37,020 | ) | |
| - | | |
| (37,020 | ) |
Financing costs - derivative warrant liabilities | |
| - | | |
| - | | |
| - | | |
| (1,406,506 | ) |
Income from investments held in Trust Account | |
| 1,225,056 | | |
| 13,108 | | |
| 1,295,452 | | |
| 20,166 | |
Interest earned on bank account | |
| 2 | | |
| - | | |
| 16 | | |
| - | |
Income (loss) before income tax | |
| 9,971,847 | | |
| (10,685,172 | ) | |
| 22,748,223 | | |
| (15,869,379 | ) |
Income tax expense | |
| 219,373 | | |
| - | | |
| 219,373 | | |
| - | |
Net income (loss) | |
$ | 9,752,474 | | |
$ | (10,685,172 | ) | |
$ | 22,528,850 | | |
$ | (15,869,379 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average shares outstanding of Class A common stock, basic and diluted | |
| 86,250,000 | | |
| 86,250,000 | | |
| 86,250,000 | | |
| 67,665,746 | |
Basic and diluted net income (loss) per share, Class A common stock | |
$ | 0.09 | | |
$ | (0.10 | ) | |
$ | 0.21 | | |
$ | (0.18 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average shares outstanding of Class B common stock, basic and diluted | |
| 21,562,500 | | |
| 21,562,500 | | |
| 21,562,500 | | |
| 20,956,492 | |
Basic and diluted net income (loss) per share, Class B common stock | |
$ | 0.09 | | |
$ | (0.10 | ) | |
$ | 0.21 | | |
$ | (0.18 | ) |
The
accompanying notes are an integral part of these condensed financial statements.
COMPUTE
HEALTH ACQUISITION CORP.
UNAUDITED
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
THREE
AND SIX MONTHS ENDED JUNE 30, 2022
| |
Common Stock | | |
Additional | | |
| | |
Total | |
| |
Class A | | |
Class B | | |
Paid-In | | |
Accumulated | | |
Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficit | |
Balance - December 31, 2021 | |
| - | | |
$ | - | | |
| 21,562,500 | | |
$ | 2,156 | | |
$ | - | | |
| (61,518,209 | ) | |
$ | (61,516,053 | ) |
Net income | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 12,776,376 | | |
| 12,776,376 | |
Balance - March 31, 2022 | |
| - | | |
$ | - | | |
| 21,562,500 | | |
$ | 2,156 | | |
$ | - | | |
| (48,741,833 | ) | |
$ | (48,739,677 | ) |
Remeasurement of Class A common stock to redemption value | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (725,192 | ) | |
| (725,192 | ) |
Net income | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 9,752,474 | | |
| 9,752,474 | |
Balance - June 30, 2022 | |
| - | | |
$ | - | | |
| 21,562,500 | | |
$ | 2,156 | | |
$ | - | | |
$ | (39,714,551 | ) | |
$ | (39,712,395 | ) |
THREE
AND SIX MONTHS ENDED JUNE 30, 2021
| |
| | |
| | |
| | |
Total | |
| |
Common
Stock | | |
Additional | | |
| | |
Stockholders’ | |
| |
Class
A | | |
Class
B | | |
Paid-In | | |
Accumulated | | |
Equity | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
(Deficit) | |
Balance - December 31, 2020 | |
| - | | |
$ | - | | |
| 21,562,500 | | |
$ | 2,156 | | |
$ | 22,844 | | |
$ | (5,169 | ) | |
$ | 19,831 | |
Excess of cash received over fair value of
the private placement warrants | |
| - | | |
| - | | |
| - | | |
| - | | |
| 4,491,670 | | |
| - | | |
| 4,491,670 | |
Remeasurement of Class A common stock to redemption
amount | |
| - | | |
| - | | |
| - | | |
| - | | |
| (4,514,514 | ) | |
| (67,275,686 | ) | |
| (71,790,200 | ) |
Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (5,184,207 | ) | |
| (5,184,207 | ) |
Balance - March 31, 2021 | |
| - | | |
$ | - | | |
| 21,562,500 | | |
$ | 2,156 | | |
$ | - | | |
$ | (72,465,062 | ) | |
$ | (72,462,906 | ) |
Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (10,685,172 | ) | |
| (10,685,172 | ) |
Balance - June 30, 2021 | |
| - | | |
| - | | |
| 21,562,500 | | |
| 2,156 | | |
| - | | |
| (83,150,234 | ) | |
| (83,148,078 | ) |
The
accompanying notes are an integral part of these condensed financial statements.
COMPUTE
HEALTH ACQUISITION CORP.
UNAUDITED
CONDENSED STATEMENTS OF CASH FLOWS
| |
For the Six Months
Ended June 30, | |
| |
2022 | | |
2021 | |
Cash Flows from Operating Activities: | |
| | |
| |
Net income (loss) | |
$ | 22,528,850 | | |
$ | (15,869,379 | ) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |
| | | |
| | |
Change in fair value of derivative warrant liabilities | |
| (22,701,250 | ) | |
| 13,195,740 | |
Financing costs - derivative warrant liabilities | |
| - | | |
| 1,406,506 | |
Change in fair value of promissory note – related party | |
| (1,660 | ) | |
| 145,180 | |
Loss on promissory note – related party | |
| - | | |
| 37,020 | |
Income from investments held in Trust Account | |
| (1,295,452 | ) | |
| (20,166 | ) |
Changes in operating assets and liabilities: | |
| | | |
| | |
Prepaid expenses | |
| 304,070 | | |
| (1,126,472 | ) |
Accounts payable | |
| 2,843 | | |
| 143,150 | |
Accrued expenses | |
| (160,917 | ) | |
| 152,130 | |
Deferred legal fees | |
| 514,108 | | |
| - | |
Income tax payable | |
| 219,373 | | |
| - | |
Franchise tax payable | |
| (180,045 | ) | |
| 96,975 | |
Net cash used in operating activities | |
| (770,080 | ) | |
| (1,839,316 | ) |
| |
| | | |
| | |
Cash Flows from Investing Activities | |
| | | |
| | |
Investment of cash in Trust Account | |
| - | | |
| (862,500,000 | ) |
Net cash used in investing activities | |
| - | | |
| (862,500,000 | ) |
| |
| | | |
| | |
Cash Flows from Financing Activities: | |
| | | |
| | |
Proceeds from note payable to related party | |
| - | | |
| 2,000 | |
Repayment of note payable to related party | |
| - | | |
| (266,099 | ) |
Proceeds received from initial public offering, gross | |
| - | | |
| 862,500,000 | |
Proceeds from private placement | |
| - | | |
| 19,250,000 | |
Offering costs paid | |
| - | | |
| (17,619,610 | ) |
Proceeds from promissory note to related party | |
| - | | |
| 1,500,000 | |
Net cash provided by financing activities | |
| - | | |
| 865,366,291 | |
| |
| | | |
| | |
Net change in cash | |
| (770,080 | ) | |
| 1,026,975 | |
| |
| | | |
| | |
Cash - beginning of the period | |
| 836,874 | | |
| 47,090 | |
Cash - end of the period | |
$ | 66,794 | | |
$ | 1,074,065 | |
| |
| | | |
| | |
Supplemental disclosure of noncash financing activities: | |
| | | |
| | |
Offering costs included in accrued expenses | |
$ | - | | |
$ | 372,369 | |
Offering costs paid by related party under promissory note | |
$ | - | | |
$ | 94,099 | |
Deferred underwriting commissions | |
$ | - | | |
$ | 30,187,500 | |
Reversal of offering costs included in accounts payable prior year | |
$ | - | | |
$ | 113,386 | |
The
accompanying notes are an integral part of these condensed financial statements.
COMPUTE
HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note
1 - Description of Organization, Business Operations and Liquidity
Compute
Health Acquisition Corp. (the “Company” or “Compute Health”) is a blank check company incorporated in Delaware
on October 7, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase,
reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is an
emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.
As
of June 30, 2022, the Company had not commenced any operations. All activity for the period from October 7, 2020 (inception) through
June 30, 2022 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”) described
below, and, subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not
generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates
non-operating income in the form of interest income on its investments held in the trust account from the proceeds of its Initial Public
Offering. The Company’s fiscal year end is December 31.
The
Company’s sponsor is Compute Health Sponsor LLC, a Delaware limited liability company (the “Sponsor”). The registration
statement for the Company’s Initial Public Offering was declared effective on February 4, 2021. On February 9, 2021, the Company
consummated its Initial Public Offering of 86,250,000 units (the “Units” and, with respect to the Class A common stock included
in the Units being offered, the “Public Shares”), including 11,250,000 additional Units to cover over-allotments (the “Over-Allotment
Units”), at $10.00 per Unit, generating gross proceeds of $862.5 million, and incurring offering costs of approximately $48.4 million,
of which approximately $30.2 million was for deferred underwriting commissions (see Note 6).
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 12,833,333
warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), at a price
of $1.50 per Private Placement Warrant to the Sponsor, generating proceeds of approximately $19.3 million (see Note 4).
Upon
the closing of the Initial Public Offering and the Private Placement, $862.5 million ($10.00 per Unit) of the net proceeds of the Initial
Public Offering and certain of the proceeds of the Private Placement were placed in a trust account (“Trust Account”) located
in the United States with Continental Stock Transfer & Trust Company acting as trustee, and invested only in United States “government
securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company
Act”), having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under
the Investment Company Act which invest only in direct U.S. government treasury obligations, as determined by the Company, until the
earlier of: (i) the completion of a Business Combination and (ii) the distribution of 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 Private Placement Warrants, 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 net
assets held in the Trust Account (net of amounts disbursed to management for working capital purposes, if permitted, and excluding the
amount of any deferred underwriting discount) at the time of the agreement to enter into the initial Business Combination. However, the
Company only intends to complete a Business Combination if the post-transaction company owns or acquires 50% or more of the issued and
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.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The
Company will provide the holders of its 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 held in the Trust Account ($10.00 per Public
Share). The per-share amount to be distributed to Public Stockholders who redeem their Public Shares will not be reduced by the deferred
underwriting commissions the Company will pay to the underwriters (as discussed in Note 6). These Public Shares were recorded at a redemption
value and classified as temporary equity in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting
Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”). If
the Company seeks stockholder approval, the Company will proceed with a Business Combination if a majority of the shares voted are voted
in favor of the Business Combination. The Company will not redeem the Public Shares in connection with a Business Combination in an amount
that would cause its net tangible assets to be less than $5,000,001. 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 Amended and Restated 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 the Public Shares in conjunction with a proxy solicitation pursuant to
the proxy rules and not pursuant to the tender offer rules. 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 in connection with
a Business Combination, the initial stockholders (as defined below) agreed to vote their Founder Shares (as defined below in Note 5)
and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. In addition, the initial
stockholders agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion
of a Business Combination.
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”)), will be restricted from redeeming its shares with respect to more than an aggregate
of 15% of the Public Shares, without the prior consent of the Company. The holders of the Founder Shares (the “initial stockholders”)
agreed not to propose an amendment to the Certificate of Incorporation (A) to modify the substance or timing of the Company’s obligation
to allow redemption in connection with a Business Combination or to redeem 100% of the Public Shares if the Company does not complete
a Business Combination within the Combination Period (as defined below) or (B) with respect to any other provision relating to stockholders’
rights or pre-initial Business Combination activity, unless the Company provides the Public Stockholders with the opportunity to redeem
their Public Shares in conjunction with any such amendment.
If
the Company is unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or February
9, 2023, (the “Combination Period”) and the Company’s stockholders have not amended the Certificate of Incorporation
to extend such Combination Period, the Company will (i) cease all operations except for the purpose of winding up; (ii) as promptly as
reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash,
equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and
not previously released to the Company to pay its taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the
number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders
(including the right to receive further liquidating distributions, if any); and (iii) as promptly as reasonably possible following such
redemption, subject to the approval of the remaining stockholders and the board of directors, dissolve and liquidate, subject in in each
case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable
law.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The
initial stockholders agreed to waive their rights to liquidating distributions from the Trust Account with respect to the Founder Shares
if the Company fails to complete a Business Combination within the Combination Period. However, if the initial stockholders acquire Public
Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect
to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters agreed
to waive their rights to the deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not
complete a Business Combination within in the Combination Period and, in such event, such amounts will be included with the other funds
held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is
possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be
only $10.00. In order to protect the amounts held in the Trust Account, the Sponsor agreed to be liable to the Company if and to the
extent any claims by a third party (except for the Company’s independent registered public accounting firm) 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
(a “Target”), reduce the amount of funds in the Trust Account to below (i) $10.00 per Public Share or (ii) the 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 interest which may be withdrawn to pay taxes, provided that such liability will not apply to any claims
by a third party or Target that executed a waiver of any and all rights to seek access to the Trust Account nor will it apply 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”). 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 (other than the Company’s independent registered public 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.
Liquidity
and Going Concern
As
of June 30, 2022, the Company had approximately $67,000 in its operating bank accounts and working capital of approximately $524,000
(not taking into account tax obligations of $239,000 that may be paid using investment income earned in Trust Account). No amounts have
been withdrawn from the Trust Account to pay taxes. In the three and six months ended June 30, 2022, $200,000 and $80,000 of franchise
tax payments were made from the Company’s operating account and amounts have not been withdrawn from the Trust Account. No income
tax payments have been made in the periods presented.
The
Company’s liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the payment of $25,000
from the Sponsor to purchase Founder Shares (as defined in Note 5), and borrowings under a Note (as defined in Note 5) from the Sponsor
of approximately $266,000. The Company repaid the Note in full upon consummation of the Initial Public Offering. Subsequent to the consummation
of the Initial Public Offering, the Company’s liquidity has been satisfied through the net proceeds from the consummation of the
Initial Public Offering and the Private Placement held outside of the Trust Account. 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, provide the Company Working Capital Loans (as defined in Note 5). As of June 30, 2022 and December
31, 2021, a principal amount of $1.5 million is drawn under Working Capital Loans (see Note 5).
While
management does not believe the Company will need to raise additional funds in order to meet the expenditures required for operating
the Company’s business, the Company’s Sponsor or an affiliate of the Company’s 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”).
On April 6, 2021, the Company entered into a Loan Note Instrument (the “Loan Note” or “Promissory Note - related party”)
with the Sponsor, pursuant to which, the Sponsor, in its sole and absolute discretion, may loan to us up to $1,500,000 for costs reasonably
related to the consummation of an initial Business Combination. The Loan Note does not bear any interest. The Loan Note is payable on
the earliest to occur of (i) the date on which the Company consummate its initial Business Combination and (ii) the date that the winding
up of the Company is effective. The Loan Note is subject to customary events if default, including failure by us to pay the principal
amount due pursuant to the Loan Note within five business days of the Maturity Date and certain bankruptcy events of our Company.
At
the Sponsor’s option, at any time prior to payment in full of the principal balance of the Loan Note, the Sponsor may elect to
convert all or any portion of the unpaid principal balance of the Loan Note into that number of warrants, each whole warrant exercisable
for one share of common stock of our Company (the “Conversion Warrants”), equal to: (x) the portion of the principal amount
of the Loan Note being converted, divided by (y) $1.50, rounded up to the nearest whole number of warrants. The Conversion Warrants shall
be identical to the warrants issued by us to the Sponsor in a private placement upon consummation of our initial public offering. The
Conversion Warrants are subject to customary registration rights granted by us to the Sponsor pursuant to the Loan Note. As of June 30,
2022, $1.5 million was drawn under the Promissory Note - related party, presented at its fair value of approximately $1.4 million on
the accompanying condensed balance sheets.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
On July 28, 2022, the Company entered into a
second Loan Note Instrument (the “Second Loan Note”) with its Sponsor (“Payee”), pursuant to which, Payee,
in its sole and absolute discretion, may loan to Compute Health up to $1.5 million for costs reasonably related to the
Company’s consummation of an initial Business Combination. The Second Loan Note does not bear any interest. The Second Loan
Note is payable on the earliest to occur of (i) the date on which Compute Health consummates its initial business combination and
(ii) the date that the winding up of Compute Health is effective. On July 28, 2022, the Company borrowed $750,000 under the Second
Loan Note. (See Note 11).
In
connection with the Company’s assessment of going concern considerations in accordance with FASB’s ASC Topic 205-40, “Presentation
of Financial Statements - Going Concern,” management has determined that the mandatory liquidation and subsequent dissolution,
should the Company be unable to complete a business combination, raises substantial doubt about the Company’s ability to continue
as a going concern. The Company has until February 9, 2023 to consummate a Business Combination. It is uncertain that the Company will
be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a
mandatory liquidation and subsequent dissolution. No adjustments have been made to the carrying amounts of assets or liabilities should
the Company be required to liquidate after February 9, 2023.
Risks
and Uncertainties
Management
is currently evaluating the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that
the virus could have an effect on the Company’s financial position, results of its operations and/or search for a target company,
the specific impact is not readily determinable as of the date of these condensed financial statements. The condensed financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
In
February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action,
various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further,
the impact of this action and related sanctions on the world economy are not determinable as of the date of these financial statements
and the specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as
of the date of these financial statements.
Note
2 - Basis of Presentation and Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally
accepted in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of
the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes
required by GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include normal
recurring adjustments, necessary for the fair statement of the balances and results for the periods presented. Operating results for
the three and six months ended June 30, 2022 and 2021 are not necessarily indicative of the results that may be expected through December
31, 2022.
The
accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto
included in the Annual Report on Form 10-K filed by the Company with the SEC on March 31, 2022.
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.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with
the requirements that apply to non-emerging growth companies but any such an 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 condensed financial statements with
another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended
transition period difficult or impossible because of the potential differences in accounting standards used.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times, may exceed the Federal Depository Insurance Corporation coverage limit of $250,000, and any cash held in the Trust Account.
As of June 30, 2022 and December 31, 2021, the Company had not experienced losses on these accounts and management believes the Company
is not exposed to significant risks on such accounts.
Use
of Estimates
The
preparation of condensed financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed
financial statements and the reported amounts of revenues and expenses during the reporting period. Making estimates requires management
to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set
of circumstances that existed at the date of the condensed financial statements, which management considered in formulating its estimate,
could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly
from those estimates.
Cash
and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company had approximately $14,000 and $792,000 in cash equivalents held outside the Trust Account as of June 30, 2022 and December
31, 2021, respectively.
Investments
Held in Trust Account
The
Company’s portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16)
of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government
securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held
in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When the Company’s
investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities
and investments in money market funds are presented on the condensed balance sheets at fair value at the end of each reporting period.
Gains and losses resulting from the change in fair value of these securities is included in income from investments held in Trust Account
in the accompanying condensed statements of operations. The estimated fair values of investments held in the Trust Account are determined
using available market information.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC Topic 820, “Fair
Value Measurements,” equal or approximate the carrying amounts represented in the condensed balance sheets due to their short-term
nature.
Fair
Value Measurements
Fair
value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction
between market participants at the measurement date. U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value.
The
hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements)
and the lowest priority to unobservable inputs (Level 3 measurements). These tiers consist of:
| ● | Level
1, defined as observable inputs such as quoted prices for identical instruments in active markets; |
| ● | Level
2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices
for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level
3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions,
such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In
some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In
those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input
that is significant to the fair value measurement.
Derivative
Warrant Liabilities
The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates
all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain
features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC
815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as
equity, is re-assessed at the end of each reporting period.
The
warrants issued in connection with the Initial Public Offering (the “Public Warrants”) and the Private Placement Warrants
are recognized as derivative liabilities in accordance with ASC 815. Accordingly, the Company recognizes the warrant instruments as liabilities
at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each
balance sheet date until exercised, and any change in fair value is recognized in the Company’s condensed statements of operations.
The fair value of the Public Warrants issued in connection with the Public Offering and Private Placement Warrants were initially measured
at fair value using a Monte Carlo simulation model and subsequently, the fair value of the Private Placement Warrants have been estimated
using a Monte Carlo simulation model each measurement date. The fair value of Public Warrants issued in connection with the Initial Public
Offering have subsequently been measured based on the listed market price of such warrants. As the transfer of Private Placement Warrants
to anyone who is not a permitted transferee would result in the Private Placement Warrants having substantially the same terms as the
Public Warrants, the Company determined that the fair value of each Private Placement Warrant is equivalent to that of each Public Warrant.
The fair value of the Warrants as of June 30, 2022 and December 31, 2021, is based on observable listed prices for such warrants. The
determination of the fair value of the warrant liability may be subject to change as more current information becomes available and accordingly
the actual results could differ significantly. Derivative warrant liabilities are classified as non-current liabilities as their liquidation
is not reasonably expected to require the use of current assets or require the creation of current liabilities.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Promissory
Note - Related Party
The
Company has elected the fair value option to account for its Promissory Note - related party with its Sponsor as defined and more fully
described in Note 5. As a result of applying the fair value option, the Company records each draw at fair value with a gain or loss recognized
at issuance, and subsequent changes in fair value are recorded as change in the fair value of its Promissory Note - related party on
the condensed statements of operations. The fair value is based on prices or valuation techniques that require inputs that are both unobservable
and significant to the overall fair value measurement. These inputs reflect management’s and, if applicable, an independent third-party
valuation firm’s own assumption about the assumptions a market participant would use in pricing the asset or liability.
Offering
Costs Associated with the Initial Public Offering
Offering
costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly
related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public
Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities
are expensed as incurred and presented as non-operating expenses on the condensed statements of operations. Offering costs associated
with the Class A common stock are charged against their carrying value upon the completion of the Initial Public Offering. The Company
classifies deferred underwriting commissions are non-current liabilities as their liquidation is not reasonably expected to require the
use of current assets or require the creation of current liabilities.
Class
A Common Stock Subject to Possible Redemption
The
Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing
Liabilities from Equity.” Conditionally redeemable Class A common stock (including Class A common stock that features redemption
rights that are 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, Class A common stock is classified as stockholders’
equity. The Company’s Class A common stock contains certain redemption rights that are considered to be outside of the Company’s
control and subject to occurrence of uncertain future events. Accordingly, Class A common stock subject to possible redemption is classified
as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets. Accordingly,
as of June 30, 2022 and December 31, 2021, 86,250,000 shares of Class A common stock subject to possible redemption is presented at redemption
value as temporary equity, outside of the stockholders’ deficit section of the Company’s condensed balance sheets.
The
Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the Class A common stock subject
to possible redemption to equal the redemption value at the end of each reporting period. This method would view the end of the reporting
period as if it were also the redemption date for the security. Effective with the closing of the Initial Public Offering, the Company
recognized the remeasurement from initial book value to redemption amount, which resulted in charges against additional paid-in capital
(to the extent available) and accumulated deficit. Subsequent changes in redemption value are recognized and presented as remeasurement
of Class A common stock to redemption value on the accompanying statement of changes in stockholders’ equity (deficit).
Income
Taxes
The
Company follows the asset and liability method of accounting for income taxes under FASB ASC Topic 740, “Income Taxes”
(“ASC 740”). 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. During the three and six months ended, as a result
of the increase in interest earned on the Trust Account and the Company’s projection to have taxable income for the year, the
Company’s deferred tax assets and related valuation allowance related to its net operating losses of approximately $32,000
were reversed and the net operating losses have been carried forward to reduce the Company’s income tax expense. At June 30,
2022 and December 31, 2021, the Company maintains a full valuation allowance on its deferred tax assets. The Company’s
effective tax rate was 2.20% and 0.96% for the three and six months ended June 30, 2022, respectively. The effective tax rate for
the three and six months ended June 30, 2021 was 0%. The effective tax rate differs from the statutory rate of 21%, primarily due to
the changes in the fair value of warrant liabilities and the valuation allowance on deferred tax assets. There was no taxable income
in the three and six months ended June 30, 2021.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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. 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
Income (Loss) Per Share of Common Stock
The
Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has
two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata
between the two classes of shares. Net income per common share is calculated by dividing the net income by the weighted average shares
of common stock outstanding for the respective period.
The
calculation of diluted net income (loss) per common stock does not consider the effect of the warrants issued in connection with the
Initial Public Offering (including exercise of the over-allotment option) and the Private Placement to purchase an aggregate of 34,395,833
shares of common stock in the calculation of diluted income per share, because their exercise is contingent upon future events.
The
calculation of diluted net income (loss) per common stock for the three and six months ended June 30, 2021 does not consider the effects
of the Class B founder shares no longer subject to forfeiture and as the contingency resolved at the beginning of the period would be
anti-dilutive under the treasury stock method. Remeasurement associated with the redeemable Class A common stock is excluded from earnings
per share as the redemption value approximates fair value.
The
following table reflects presents a reconciliation of the numerator and denominator used to compute basic and diluted net income (loss)
per share for each class of common stock:
| |
For the Three Months Ended
June 30,
2022 | | |
For the Three Months Ended
June 30, 2021 | |
| |
Class A | | |
Class B | | |
Class A | | |
Class B | |
Basic and diluted net income (loss) per common stock: | |
| | | |
| | | |
| | | |
| | |
Numerator: | |
| | | |
| | | |
| | | |
| | |
Allocation of net income (loss) available to stockholders | |
$ | 7,801,979 | | |
$ | 1,950,495 | | |
$ | (8,548,138 | ) | |
$ | (2,137,034 | ) |
| |
| | | |
| | | |
| | | |
| | |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Basic and Diluted weighted average shares outstanding | |
| 86,250,000 | | |
| 21,562,500 | | |
| 86,250,000 | | |
| 21,562,500 | |
| |
| | | |
| | | |
| | | |
| | |
Basic and Diluted net income (loss) per common stock | |
$ | 0.09 | | |
$ | 0.09 | | |
$ | (0.10 | ) | |
$ | (0.10 | ) |
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
| |
For the Six Months Ended
June 30,
2022 | | |
For the Six Months Ended
June
2021 | |
| |
Class A | | |
Class B | | |
Class A | | |
Class B | |
Basic and Diluted net income (loss) per common stock: | |
| | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| | |
| |
Allocation of net income (loss) available to stockholders | |
$ | 18,023,080 | | |
$ | 4,505,770 | | |
$ | (12,116,748 | ) | |
$ | (3,752,631 | ) |
| |
| | | |
| | | |
| | | |
| | |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Basic and Diluted weighted average shares outstanding | |
| 86,250,000 | | |
| 21,562,500 | | |
| 67,665,746 | | |
| 20,956,492 | |
| |
| | | |
| | | |
| | | |
| | |
Basic and Diluted net income (loss) per common stock | |
$ | 0.21 | | |
$ | 0.21 | | |
$ | (0.18 | ) | |
$ | (0.18 | ) |
Recent
Accounting Pronouncements
In
June 2022, the FASB issued ASU 2022-03, ASC Subtopic 820 “Fair Value Measurement of Equity Securities Subject to Contractual Sale
Restrictions”. The ASU amends ASC 820 to clarify that a contractual sales restriction is not considered in measuring an equity
security at fair value and to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that
are measured at fair value. The ASU applies to both holders and issuers of equity and equity-linked securities measured at fair value.
The amendments in this ASU are effective for the Company in fiscal years beginning after December 15, 2023, and interim periods within
those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made
available for issuance. The Company is considering the impact of this pronouncement on the financial statements.
The
Company’s management does not believe that any other recently issued, but not yet effective, accounting standards if currently
adopted would have a material effect on the accompanying condensed financial statements.
Note
3 - Initial Public Offering
On
February 9, 2021, the Company consummated its Initial Public Offering of 86,250,000 Units, including 11,250,000 Over-Allotment Units,
at $10.00 per Unit, generating gross proceeds of $862.5 million, and incurring offering costs of approximately $48.4 million, of which
approximately $30.2 million was for deferred underwriting commissions.
Each
Unit consists of one share of Class A common stock, and one-quarter of one redeemable warrant (each, a “Public Warrant”).
Each 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 7).
Note
4 - Private Placement Warrants
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the Private Placement of 12,833,333 Private Placement Warrants,
at a price of $1.50 per Private Placement Warrant to the Sponsor, generating proceeds of approximately $19.3 million.
Each
Private Placement Warrant is exercisable for one whole share of Class A common stock at a price of $11.50 per common share. A portion
of the proceeds from the sale of the Private Placement Warrants to the Sponsor was 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 Private Placement
Warrants will expire worthless. The Private Placement Warrants will be non-redeemable (except as described below in Note 7 under “Warrants
- Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00”) so long as they are held by
the initial purchasers or their permitted transferees.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The
purchasers of the Private Placement Warrants agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private
Placement Warrants (except to permitted transferees) until 30 days after the completion of the initial Business Combination.
Note
5 - Related Party Transactions
Founder
Shares
On
October 16, 2020, the Sponsor purchased 21,562,500 shares of the Company’s Class B common stock, par value $0.0001 per share, (the
“Founder Shares”) for an aggregate price of $25,000. The Sponsor agreed to forfeit up to 2,812,500 Founder Shares to the
extent that the over-allotment option was not exercised in full by the underwriters, so that the Founder Shares would represent 20.0%
of the Company’s issued and outstanding shares after the Initial Public Offering. The underwriter exercised its over-allotment
option in full on February 9, 2021; thus, these 2,812,500 Founder Shares are no longer subject to forfeiture.
The
initial stockholders 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 the initial Business Combination and (B) subsequent to the initial Business Combination,
(x) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share for any 20 trading days within any
30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company completes
a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the stockholders having
the right to exchange their shares of common stock for cash, securities or other property.
Related
Party Loans
On
October 16, 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”). This loan was non-interest bearing and payable upon the closing of the
Initial Public Offering. The Company borrowed approximately $266,000 under the Note and repaid the Note in full upon consummation of
the Initial Public Offering.
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”). On April 6, 2021, the Company entered into a Loan Note Instrument (the “Loan Note” or “Promissory
Note - related party”) with the Sponsor, pursuant to which, the Sponsor, in its sole and absolute discretion, may loan to the Company
up to $1.5 million for costs reasonably related to the Company’s consummation of an initial Business Combination. The Loan Note
does not bear any interest. The Loan Note is payable on the earliest to occur of (i) the date on which the Company consummates its initial
Business Combination and (ii) the date that the winding up of the Company is effective. The Loan Note is subject to customary events
if default, including failure by the Company to pay the principal amount due pursuant to the Loan Note within five business days of the
Maturity Date and certain bankruptcy events of the Company.
At
the Sponsor’s option, at any time prior to payment in full of the principal balance of the Loan Note, the Sponsor may elect to
convert all or any portion of the unpaid principal balance of the Loan Note into that number of warrants, each whole warrant exercisable
for one share of common stock of the Company (the “Conversion Warrants”), equal to: (x) the portion of the principal amount
of the Loan Note being converted, divided by (y) $1.50, rounded up to the nearest whole number of warrants. The Conversion Warrants shall
be identical to the warrants issued by the Company to the Sponsor in a private placement upon consummation of the Company’s initial
public offering. The Conversion Warrants are subject to customary registration rights granted by the Company to the Sponsor pursuant
to the Loan Note. As of June 30, 2022 and December 31, 2021, $1.5 million was drawn on the Promissory Note - related party, presented
at its fair value of $1.4 million on the accompanying condensed balance sheets.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note
6 - Commitments and Contingencies
Registration
Rights
The
holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any
(and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion
of the Working Capital Loans), were entitled to registration rights pursuant to a registration rights agreement signed upon the consummation
of the Initial Public Offering. These holders were entitled to certain demand and “piggyback” registration rights. However,
the registration rights agreement provided that the Company would not be required to effect or permit any registration or cause any registration
statement to become effective until termination of the applicable lock-up period. The Company will bear the expenses incurred in connection
with the filing of any such registration statements.
Underwriting
Agreement
The
Company granted the underwriters a 45-day option from the date of Initial Public Offering to purchase up to 11,250,000 additional Units
to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. The underwriter
exercised its over-allotment option in full on February 9, 2021.
The
underwriters were entitled to an underwriting discount of $0.20 per Unit, or approximately $17.3 million in the aggregate, paid upon
the closing of the Initial Public Offering. An additional fee of $0.35 per Unit, or approximately $30.2 million in the aggregate will
be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the
amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the
underwriting agreement.
Administrative
Services Agreement
Commencing
on the date that the Company’s securities were first listed on the NYSE through the earlier of consummation of the initial Business
Combination and the liquidation, the Company agreed to pay the Sponsor a total of $10,000 per month for administrative and support services.
The Sponsor has waived these fees through June 30, 2022.
Deferred
Legal Fees
The
Company has an agreement to obtain legal advisory services pursuant to which the Company’s legal counsel has agreed to defer their
fees until the closing of the Business Combination. The deferred fees will become payable to the legal counsel in the event the Company
completes a Business Combination. As of June 30, 2022 and December 31, 2021, the amount of these fees is approximately $1.5 million and
$1.0 million, respectively, and is included as deferred legal fees on the accompanying condensed balance sheets.
Note
7 - Warrants
As
of June 30, 2022 and December 31, 2021, the Company had 21,562,500 Public Warrants and 12,833,333 Private Warrants outstanding.
Public
Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units
and only whole Public 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; provided in each case that the Company has
an effective registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the
warrants and a current prospectus relating to them is available and such shares are registered, qualified or exempt from registration
under the securities, or blue sky, laws of the state of residence of the holder (or holders are permitted to exercise their warrants
on a cashless basis under certain circumstances as a result of (i) the Company’s failure to have an effective registration statement
by the 60th business day after the closing of the initial Business Combination or (ii) a notice of redemption described under
“Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00”). The Company agreed that
as soon as practicable, but in no event later than 20 business days after the closing of its initial Business Combination, the Company
will use its commercially reasonable efforts to file with the SEC and have an effective registration statement covering the shares of
Class A common stock issuable upon exercise of the warrants and will use its commercially reasonable efforts to cause the same to become
effective within 60 business days after the closing of the Company’s initial Business Combination and to maintain a current prospectus
relating to those shares of Class A common stock until the warrants expire or are redeemed. If the shares issuable upon exercise of the
warrants are not registered under the Securities Act in accordance with the above requirements, the Company will be required to permit
holders to exercise their warrants on a cashless basis. However, no warrant will be exercisable for cash or on a cashless basis, and
the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares
upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration
is available. Notwithstanding the above, if the Company’s shares of Class A common stock are at the time of any exercise of a warrant
not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section
18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do
so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects,
it will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will
use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is
not available.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The
warrants have an exercise price of $11.50 per share, subject to adjustments, and will expire five years after the completion of a Business
Combination or earlier upon redemption or liquidation. In addition, if (x) the Company issues additional shares or equity-linked securities
for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue
price of less than $9.20 per share (with such issue price or effective issue price to be determined in good faith by the board of directors,
and in the case of any such issuance to the initial stockholders or their affiliates, without taking into account any Founder Shares
held by them prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent
more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the
date of the consummation of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading price
of the shares of Class A 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 each warrant will be adjusted (to the nearest cent) such that the effective exercise price per full share will be equal to 115% of
the higher of (i) the Market Value and (ii) the Newly Issued Price, and the $18.00 per-share redemption trigger price described under
“Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00” will be adjusted (to the
nearest cent) to be equal to 180% of the higher of (i) the Market Value and (ii) the Newly Issued Price, and the $10.00 per-share redemption
trigger price described under “Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00”
will be adjusted (to the nearest cent) to be equal to the higher of (i) the Market Value and (ii) the Newly Issued Price.
The
Private Placement Warrants are identical to the Public Warrants, except that, so long as they are held by the Sponsor or its permitted
transferees, (i) they will not be redeemable by the Company, (ii) they (including the shares of Class A common stock issuable upon exercise
of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by the Sponsor until 30 days after
the completion of the initial Business Combination, (iii) they may be exercised by the holders on a cashless basis and (iv) are subject
to registration rights.
Redemption
of warrants when the price per share of Class A common stock equals or exceeds $18.00:
Once
the warrants become exercisable, the Company may redeem the outstanding warrants (except as described herein with respect to the Private
Placement Warrants):
|
● |
in
whole and not in part; |
|
● |
at
a price of $0.01 per warrant; |
|
● |
upon
a minimum of 30 days’ prior written notice of redemption; and |
| ● | if, and only if, the last reported 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 ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders. |
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The
Company will not redeem the warrants as described above unless an effective registration statement under the Securities Act covering
the shares of Class A common stock issuable upon exercise of the warrants is effective and a current prospectus relating to those shares
of Class A common stock is available throughout the 30-day redemption period. Any such exercise would not be on a cashless basis and
would require the exercising warrant holder to pay the exercise price for each warrant being exercised.
Redemption
of warrants when the price per share of Class A common stock equals or exceeds $10.00:
Commencing
ninety days after the warrants become exercisable, the Company may redeem the outstanding warrants:
|
● |
in
whole and not in part; |
|
● |
at
$0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise
their warrants on a cashless basis prior to redemption and receive that number of shares of Class A common stock determined by reference
to an agreed table based on the redemption date and the fair market value of the Class A common stock; |
|
● |
if,
and only if, the last reported sale price of Class A common stock equals or exceeds $10.00 per share on the trading day prior to
the date on which the Company sends the notice of redemption to the warrant holders; |
|
● |
if,
and only if, the Private Placement Warrants are also concurrently exchanged at the same price (equal to a number of shares of Class
A common stock) as the outstanding Public Warrants, as described above; and |
|
● |
if,
and only if, there is an effective registration statement covering the issuance of the shares of Class A common stock (or a security
other than the Class A common stock into which the Class A common stock has been converted or exchanged for in the event the Company
is not the surviving company in the initial Business Combination) issuable upon exercise of the warrants and a current prospectus
relating thereto available throughout the 30-day period after written notice of redemption is given. |
The
fair market value of Class A common stock mentioned above shall mean the volume-weighted average price of Class A common stock for the
10 trading days immediately following the date on which the notice of redemption is sent to the holders of warrants. In no event will
the warrants be exercisable in connection with this redemption feature for more than 0.361 shares of Class A common stock per warrant
(subject to adjustment).
In
no event will the Company be required to net cash settle any warrant. 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.
Note
8 - Class A Common Stock Subject to Possible Redemption
The
Company’s Class A common stock feature certain redemption rights that are considered to be outside of the Company’s control
and subject to the occurrence of future events. The Company is authorized to issue 300,000,000 shares of Class A common stock with a
par value of $0.0001 per share. Holders of the Company’s Class A common stock are entitled to one vote for each share. As of June
30, 2022 and December 31, 2021, there were 86,250,000 shares of Class A common stock outstanding, all of which were subject to possible
redemption and are classified outside of permanent equity in the condensed balance sheets.
The
Class A common stock subject to possible redemption reflected on the condensed balance sheets is reconciled on the following table:
Gross proceeds | |
$ | 862,500,000 | |
Less: | |
| | |
Proceeds allocated to Public Warrants | |
| (24,753,640 | ) |
Class A common stock issuance costs | |
| (47,036,560 | ) |
Plus: | |
| | |
Remeasurement of carrying value to redemption value | |
| 71,790,200 | |
Class A common stock subject to possible redemption | |
$ | 862,500,000 | |
Remeasurement of carrying value to
redemption value | |
| 725,192 | |
Class A common stock subject to possible redemption at June 30, 2022 | |
$ | 863,225,192 | |
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note
9 - Stockholders’ Deficit
Preferred
Stock - The Company is authorized to issue 3,000,000 shares of preferred stock, par value $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. As of June
30, 2022 and December 31, 2021, there were no shares of preferred stock issued or outstanding.
Class
A Common Stock - The Company is authorized to issue 300,000,000 shares of Class A common stock with a par value of $0.0001 per
share. As of June 30, 2022 and December 31, 2021, there were 86,250,000 shares of Class A common stock issued or outstanding, all of
which are subject to possible redemption and have been classified as temporary equity. See Note 8.
Class
B Common Stock - The Company is authorized to issue 30,000,000 shares of Class B common stock with a par value of $0.0001 per
share. As of June 30, 2022 and December 31, 2021, there were 21,562,500 shares of Class B common stock issued and outstanding.
Prior
to the initial Business Combination, only holders of Class B common stock will have the right to vote on the election of directors. Holders
of the Class A common stock will not be entitled to vote on the election of directors during such time. In addition, prior to the initial
Business Combination, holders of a majority of the outstanding shares of Class B common stock may remove a member of the board of directors
for any reason. These provisions of the certificate of incorporation may only be amended by a resolution passed by the holders of a majority
of shares of the Class B common stock. With respect to any other matter submitted to a vote of the stockholders, including any vote in
connection with the initial Business Combination, except as required by applicable law or stock exchange rule, holders of the Class A
common stock and holders of the Class B common stock will vote together as a single class, with each share entitling the holder to one
vote.
The
Class B common stock will automatically convert into Class A common stock at the time of the initial Business Combination, or earlier
at the option of the holder, on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations
and the like, and subject to further adjustment as described herein. 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 issued in the Initial Public Offering and related to the closing of
the initial Business Combination, including pursuant to a specified future issuance, 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 then-outstanding shares of
Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance, including pursuant to a specified
future 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 the completion of the Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed
issued in connection with the initial Business Combination (net of the number of shares of Class A common stock redeemed in connection
with the initial Business Combination and excluding any shares or equity-linked securities issued or issuable to any seller in the initial
Business Combination).
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note
10 - Fair Value Measurements
The
following tables presents information about the Company’s financial assets and liabilities that are measured at fair value on a
recurring basis as of June 30, 2022 and December 31, 2021, by level within the fair value hierarchy:
June
30, 2022
Description | |
Quoted Prices in Active Markets (Level 1) | | |
Significant Other Observable Inputs (Level 2) | | |
Significant Other Unobservable Inputs (Level 3) | |
Assets: | |
| | |
| | |
| |
Investments held in Trust Account - Money Market Fund | |
$ | 863,845,224 | | |
$ | - | | |
$ | - | |
Liabilities: | |
| | | |
| | | |
| | |
Derivative warrant liabilities - public warrants | |
$ | 4,743,750 | | |
$ | - | | |
$ | - | |
Derivative warrant liabilities - private warrants | |
$ | - | | |
$ | 2,823,330 | | |
$ | - | |
Promissory note - related party | |
$ | - | | |
$ | - | | |
$ | 1,391,290 | |
December
31, 2021
Description | |
Quoted Prices in Active Markets (Level 1) | | |
Significant Other Observable Inputs (Level 2) | | |
Significant Other Unobservable Inputs (Level 3) | |
Assets: | |
| | |
| | |
| |
Investments held in Trust Account - Money Market Fund | |
$ | 862,549,773 | | |
$ | - | | |
$ | - | |
Liabilities: | |
| | | |
| | | |
| | |
Derivative warrant liabilities - public warrants | |
$ | 18,975,000 | | |
$ | - | | |
$ | - | |
Derivative warrant liabilities - private warrants | |
$ | - | | |
$ | 11,293,330 | | |
$ | - | |
Promissory note - related party | |
$ | - | | |
$ | - | | |
$ | 1,392,950 | |
Transfers
to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. The estimated fair value of the Public Warrants transferred
from a Level 3 fair value measurement to a Level 1 fair value measurement, when the Public Warrants were separately listed and traded
in March 2021. The estimated fair value of the Private Placement Warrants was transferred from a Level 3 measurement to a Level 2 fair
value measurement in July 2021.There were no transfers to/from Levels 1, 2, and 3 during the three and six months ended June 30, 2022.
Level
1 instruments include investments in mutual funds invested in government securities. The Company uses inputs such as actual trade data,
benchmark yields, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.
Level
2 instruments include Private Placement Warrants. The Company uses the same quoted market prices as the Public Warrants to determine
their fair value.
The
fair value of the Public Warrants as of June 30, 2022 and December 31, 2021, was measured utilizing the Level 1 input of the observable
listed trading price for such warrants.
Level
3 instruments are comprised of the Working Capital Loan measured at fair value using a Monte Carlo simulation model. The estimated fair
value of the Working Capital Loan is determined using Level 3 inputs. Inherent in a Monte Carlo simulation model are assumptions related
to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of
its common stock warrants based on implied volatility from the Company’s traded warrants and from historical volatility of select
peer company’s common stock that matches the expected remaining life of the warrants. The risk-free interest rate is based on the
U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected
life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate,
which the Company anticipates remaining at zero.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The
following table provides quantitative information regarding Level 3 fair value measurements inputs used to measure the fair value of
the underlying conversion feature of the promissory note - related party at each measurement dates:
| |
June 30, 2022 | | |
December 31, 2021 | |
Volatility | |
| 53.9 | % | |
| 67.2 | % |
Stock price | |
$ | 0.22 | | |
$ | 0.88 | |
Expected life of the options to convert | |
| 0.42 | | |
| 0.61 | |
Risk-free rate | |
| 2.23 | % | |
| 0.23 | % |
Dividend yield | |
| 0.0 | % | |
| 0.0 | % |
The
change in the fair value of the Promissory Note - related party measured with Level 3 inputs for the period for the six months ended
June 30, 2022, is summarized as follows:
Fair Value of Promissory Note - related party, December 31, 2021 | |
$ | 1,392,950 | |
Change in fair value of Promissory Note - related party | |
| (41,590 | ) |
Fair Value of Promissory Note - related party, March 31, 2022 | |
| 1,351,360 | |
Change in fair value of Promissory Note - related party | |
| 39,930 | |
Fair Value of Promissory Note - related party, June 30, 2022 | |
$ | 1,391,290 | |
Note
11 - Subsequent Events
The
Company evaluated subsequent events and transactions that occurred after the balance sheet date through, the date that the condensed
financial statements were available to be issued. Based on this review, the Company did not identify any subsequent events that would
have required adjustment or disclosure in the condensed financial statements other than disclosed below.
On July 28, 2022, the Company entered into a
second Loan Note Instrument (the “Second Loan Note”) with its Sponsor (“Payee”), pursuant to which, Payee,
in its sole and absolute discretion, may loan to Compute Health up to $1.5 million for costs reasonably related to the
Company’s consummation of an initial Business Combination. The Second Loan Note does not bear any interest. The Second Loan
Note is payable on the earliest to occur of (i) the date on which Compute Health consummates its initial business combination and
(ii) the date that the winding up of Compute Health is effective. The Second Loan Note is subject to customary events if default,
including failure by Compute Health to pay the principal amount due pursuant to the Second Loan Note within five business days of
the Maturity Date and certain bankruptcy events of Compute Health. On July 28, 2022, the Company borrowed $750,000 under the Second
Loan Note.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References
to “we”, “us”, “our” or the “Company” are to Compute Health Acquisition Corp., except
where the context requires otherwise. The following discussion should be read in conjunction with our unaudited condensed financial statements
and related notes thereto included elsewhere in this report.
Cautionary
Note Regarding Forward-Looking Statements
This
Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking
statements on our current expectations and projections about future events. These forward-looking statements are subject to known and
unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements
to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking
statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,”
“could,” “would,” “expect,” “plan,” “anticipate,” “believe,”
“estimate,” “continue,” or the negative of such terms or other similar expressions. Such statements include,
but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements
other than statements of historical fact included in this Form 10-Q. Factors that might cause or contribute to such a discrepancy include,
but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.
Overview
We
are a blank check company incorporated in Delaware on October 7, 2020 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”).
Our Sponsor is Compute Health Sponsor LLC, a Delaware limited liability company. We intend to complete our initial Business Combination
using cash from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our capital stock, debt or
a combination of cash, stock and debt.
The
registration statement for our Initial Public Offering became effective on February 4, 2021. On February 9, 2021, we consummated its
Initial Public Offering of 86,250,000 Units, including 11,250,000 Over-Allotment Units to cover over-allotments, at $10.00 per Unit,
generating gross proceeds of $862.5 million, and incurring offering costs of approximately $48.4 million, of which approximately $30.2
million was for deferred underwriting commissions.
Simultaneously
with the closing of the Initial Public Offering, we consummated the Private Placement of 12,833,333 Private Placement Warrants, at a
price of $1.50 per Private Placement Warrant to the Sponsor, generating proceeds of approximately $19.3 million.
Upon
the closing of the Initial Public Offering and the Private Placement, $862.5 million ($10.00 per Unit) of the net proceeds of the Initial
Public Offering and certain of the proceeds of the Private Placement was placed in a Trust Account located in the United States with
Continental Stock Transfer & Trust Company acting as trustee, and invested only in United States “government securities”
within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”),
having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment
Company Act which invest only in direct U.S. government treasury obligations, as determined by us, until the earlier of: (i) the completion
of a Business Combination and (ii) the distribution of the Trust Account as described below.
If
we are unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or February 9, 2023,
(the “Combination Period”) and our stockholders have not amended the Certificate of Incorporation to extend such Combination
Period, 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); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining
stockholders and the board of directors, dissolve and liquidate, subject in in each case to our obligations under Delaware law to provide
for claims of creditors and the requirements of other applicable law.
The
issuance of additional shares of our stock in a Business Combination:
| ● | may
significantly dilute the equity interest of investors in Initial Public Offering, which dilution would increase if the anti-dilution
provisions in the Class B common stock resulted in the issuance of Class A shares on a greater than one-to-one basis upon conversion
of the Class B common stock; |
| ● | may
subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock; |
| ● | could
cause a change of control if a substantial number of shares of our common stock is issued, which may affect, among other things, our
ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers
and directors; |
| ● | may
have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking
to obtain control of us; |
| ● | may
adversely affect prevailing market prices for our Units, Class A common stock and/or warrants; and |
| ● | may
not result in adjustment to the exercise price of our warrants. |
Similarly,
if we issue debt securities or otherwise incur significant debt to bank or other lenders or owners of a target, it could result in:
| ● | default
and foreclosure on our assets if our operating revenues after an initial Business Combination are insufficient to repay our debt obligations; |
| ● | acceleration
of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants
that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
| ● | our
immediate payment of all principal and accrued interest, if any, if the debt is payable on demand; |
| ● | our
inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while
the debt is outstanding; |
| ● | our
inability to pay dividends on our common stock; |
| ● | using
a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends
on our common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund other general corporate
purposes; |
| ● | limitations
on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
| ● | increased
vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; |
| ● | limitations
on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution
of our strategy; and |
| ● | other
purposes and other disadvantages compared to our competitors who have less debt. |
Results
of Operations
Our
entire activity since inception through June 30, 2022 related to our formation, the preparation for an Initial Public Offering, and since
our Initial Public Offering, our activity has been limited to the search for a prospective initial Business Combination. We will not
generate any operating revenues until the closing and completion of our initial Business Combination.
For
the three months ended June 30, 2022, we had net income of approximately $9.8 million, which consisted of approximately $9.5 million
for change in fair value of derivative liabilities and approximately $1.2 million from income from the investments held in the Trust
Account, partially offset by approximately $40,000 for change in fair value of promissory note, approximately $617,000 of general and
administrative expenses, $50,000 of franchise tax expense and approximately $219,000 of income tax expense. Due to the increase in income
earned on the Trust Account which we expect continue in the second half of the year we are no longer projecting net operating losses.
As a result, during the three and six months ended June 30, we had income tax expense of approximately $219,000. The Company’s
effective tax rate was 2.20% and 0% for the three months ended June 30, 2022 and 2021, respectively. The effective tax rate differs from the statutory rate of 21%, primarily due to the changes in the fair value of warrant liabilities and
the valuation allowance on deferred tax assets. There was no taxable income in the three and six months ended June 30, 2021.
For
the three months ended June 30, 2021, we had a loss of approximately $10.7 million, which consisted of approximately $664,000 of general
and administrative expenses, approximately $49,000 of franchise tax expense, approximately $9.8 million for change in fair value of derivative
liabilities, approximately $145,000 for change in fair value of promissory note, and approximately $37,000 loss on the promissory note
to related party, partially offset by approximately $13,000 gain on the investments held in the Trust Account.
For
the six months ended June 30, 2022, we had net income of approximately $22.5 million, which consisted of approximately $22.7 million
for change in fair value of derivative liabilities, approximately $2,000 for change in fair value of promissory note, and approximately
$1.3 million from income from the investments held in the Trust Account, partially offset by approximately $1.2 million of general and
administrative expenses, $100,000 of franchise tax expense and approximately $219,000 of income tax expense. The Company’s effective tax rate was 0.96% and 0% for the six months
ended June 30, 2022 and 2021, respectively. The effective tax rate differs from the statutory rate of 21%, primarily due to the changes in the fair value of warrant liabilities and
the valuation allowance on deferred tax assets. There was no taxable income in the three and six months ended June 30, 2021.
For
the six months ended June 30, 2021, we had a loss of approximately $15.9 million, which consisted of approximately $1.0 million of general
and administrative expenses, approximately $98,000 of franchise tax expense, approximately $13.2 million for change in fair value of
derivative liabilities, approximately $145,000 for change in fair value of promissory note, approximately $37,000 loss on the promissory
note to related party, approximately $1.4 million of offering costs to derivative warrant liabilities, partially offset by approximately
$20,000 gain on the investments held in the Trust Account.
Liquidity
and Going Concern
As
indicated in the accompanying unaudited condensed financial statements, at June 30, 2022, we had approximately $67,000 cash in hand,
and working capital of approximately $524,000 (not taking into account tax obligations of approximately $239,000 that may be paid using
investment income earned in Trust Account). No amounts have been withdrawn from the Trust Account to pay taxes. In the three and six
months ended June 30, 2022, $200,000 and $80,000 of franchise tax payments were made from our operating account and amounts have not
been withdrawn from the Trust Account. No income tax payments have been made in the periods presented.
Our
liquidity needs have been satisfied prior to the completion of the Initial Public Offering through a capital contribution from our Sponsor
of $25,000 and borrowings under an unsecured promissory note from our Sponsor of approximately $170,000. We repaid the Note in full upon
consummation of the Initial Public Offering. Subsequent from the consummation of the Initial Public Offering, our liquidity has been
satisfied through the net proceeds from the consummation of the Initial Public Offering and the Private Placement held outside of the
Trust Account and the borrowings from our Sponsor under working capital loans.
While
we do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business, 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
(“Working Capital Loans”). On April 6, 2021, we entered into a Loan Note Instrument (the “Loan Note” or “Promissory
Note - related party”) with our Sponsor, pursuant to which, our Sponsor, in its sole and absolute discretion, may loan to us up
to $1.5 million for costs reasonably related to the consummation of an initial Business Combination. The Loan Note does not bear any
interest. The Loan Note is payable on the earliest to occur of (i) the date on which we consummate our initial Business Combination and
(ii) the date that the winding up of our Company is effective. The Loan Note is subject to customary events if default, including failure
by us to pay the principal amount due pursuant to the Loan Note within five business days of the Maturity Date and certain bankruptcy
events of our Company.
At
our Sponsor’s option, at any time prior to payment in full of the principal balance of the Loan Note, our Sponsor may elect to
convert all or any portion of the unpaid principal balance of the Loan Note into that number of warrants, each whole warrant exercisable
for one share of common stock of our Company (the “Conversion Warrants”), equal to: (x) the portion of the principal amount
of the Loan Note being converted, divided by (y) $1.50, rounded up to the nearest whole number of warrants. The Conversion Warrants shall
be identical to the warrants issued by us to the Sponsor in a private placement upon consummation of our initial public offering. The
Conversion Warrants are subject to customary registration rights granted by us to the Sponsor pursuant to the Loan Note. As of June 30,
2022, $1.5 million was drawn on the Promissory Note - related party, presented at its fair value of $1.4 million on the accompanying
condensed balance sheets.
On July 28, 2022, we entered into a second Loan
Note Instrument (the “Second Loan Note”) with our Sponsor (“Payee”), pursuant to which, Payee, in its sole
and absolute discretion, may loan to Compute Health up to $1.5 million for costs reasonably related to our consummation of an
initial Business Combination. The Second Loan Note does not bear any interest. The Second Loan Note is payable on the earliest to
occur of (i) the date on which we consummate an initial business combination and (ii) the date that the winding up of our Company is
effective. On July 28, 2022, we borrowed $750,000 under the Second Loan Note.
In
connection with the Company’s assessment of going concern considerations in accordance with the authoritative guidance in Financial
Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) ASC Topic 205-40, “Presentation
of Financial Statements - Going Concern,” management has determined that the mandatory liquidation and subsequent dissolution,
should the Company be unable to complete a business combination, raises substantial doubt about the Company’s ability to continue
as a going concern. The Company has until February 9, 2023, to consummate a Business Combination. It is uncertain that we will be able
to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a mandatory
liquidation and subsequent dissolution. No adjustments have been made to the carrying amounts of assets or liabilities should the Company
be required to liquidate after February 9, 2023.
Contractual
Obligations
Registration
Rights
The
holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any
(and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion
of the Working Capital Loans), were entitled to registration rights pursuant to a registration rights agreement signed upon the consummation
of the Initial Public Offering. These holders were entitled to certain demand and “piggyback” registration rights. However,
the registration rights agreement provided that we would not be required to effect or permit any registration or cause any registration
statement to become effective until termination of the applicable lock-up period. We will bear the expenses incurred in connection with
the filing of any such registration statements.
Underwriting
Agreement
The
underwriters are entitled to an underwriting discount of $0.20 per Unit, or approximately $17.3 million in the aggregate, paid upon the
closing of the Initial Public Offering. An additional fee of $0.35 per Unit, or approximately $30.2 million in the aggregate will be
payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the
amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting
agreement.
Deferred
Legal fees
We
have an agreement to obtain legal advisory services pursuant to which our legal counsel has agreed to defer their fees until the closing
of the Business Combination. The deferred fees will become payable to the legal counsel in the event the Company completes a Business
Combination. As of June 30, 2022, the amount of these fees is approximately $1.5 million, included as deferred legal fees on the accompanying
balance sheets included in the condensed financial statements in Part 1 Item 1 of this Form 10-Q.
Administrative
Services Agreement
Commencing
on the date that our securities were first listed on the NYSE through the earlier of consummation of the initial Business Combination
and the liquidation, we agreed to pay an affiliate of our Sponsor a total of $10,000 per month for administrative and support services.
Our Sponsor has waived these fees through June 30, 2022.
Critical
Accounting Policies and Estimates
This
management’s discussion and analysis of our financial condition and results of operations is based on our condensed financial statements,
which have been prepared in accordance with United States generally accepted accounting principles. The preparation of these condensed
financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and
expenses and the disclosure of contingent assets and liabilities in our condensed financial statements. On an ongoing basis, we evaluate
our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates
on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have identified the
following as our critical accounting policies:
Investments
Held in Trust Account
Our
portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment
Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and
generally have a readily determinable fair value, or a combination thereof. When our investments held in the Trust Account are comprised
of U.S. government securities, the investments are classified as trading securities. When our investments held in the Trust Account are
comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds
are presented on the condensed balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the
change in fair value of these securities is included in income from investments held in Trust Account in the accompanying condensed statements
of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Derivative
Warrant Liabilities
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 FASB ASC Topic 815, “Derivatives and Hedging”
(“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities
or as equity, is re-assessed at the end of each reporting period.
The
warrants issued in connection with the Initial Public Offering (the “Public Warrants”) and the Private Placement Warrants
are recognized as derivative liabilities in accordance with ASC 815. Accordingly, we recognize the warrant instruments as liabilities
at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each
balance sheet date until exercised, and any change in fair value is recognized in our condensed statements of operations. The fair value
of the Public Warrants issued in connection with the Public Offering and Private Placement Warrants were initially measured at fair value
using a Monte Carlo simulation model and subsequently, the fair value of the Private Placement Warrants have been estimated using a Monte
Carlo simulation model each measurement date. The fair value of Public Warrants issued in connection with the Initial Public Offering
have subsequently been measured based on the listed market price of such warrants. As the transfer of Private Placement Warrants to anyone
who is not a permitted transferee would result in the Private Placement Warrants having substantially the same terms as the Public Warrants,
we determined that the fair value of each Private Placement Warrant is equivalent to that of each Public Warrant. The fair value of the
Warrants as of June 30,2022 and December 31, 2021, is based on observable listed prices for such warrants. The determination of the fair
value of the warrant liability may be subject to change as more current information becomes available and accordingly the actual results
could differ significantly. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably
expected to require the use of current assets or require the creation of current liabilities.
Promissory
Note - Related Party
We
have elected the fair value option to account for its Promissory Note - related party with our Sponsor as defined and more fully described
in the Notes to the unaudited condensed financial statements. As a result of applying the fair value option, the Company records each
draw at fair value with a gain or loss recognized at issuance, and subsequent changes in fair value are recorded as change in the fair
value of its Promissory Note - related party on the condensed statements of operations. The fair value is based on prices or valuation
techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect
management’s and, if applicable, an independent third-party valuation firm’s own assumption about the assumptions a market
participant would use in pricing the asset or liability
Offering
Costs Associated with the Initial Public Offering
Offering
costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly
related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public
Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities
are expensed as incurred, presented as non-operating expenses in the condensed statements of operations. Offering costs associated with
the Class A common stock are charged against their carrying value upon the completion of the Initial Public Offering. Deferred underwriting
commissions are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets
or require the creation of current liabilities.
Class
A Common Stock Subject to Possible Redemption
We
account for our Class A common stock subject to possible redemption in accordance with the guidance in ASC 480. Class A common stock
subject to mandatory redemption (if any) is classified as liability instruments and are measured at fair value. Conditionally redeemable
Class A common stock (including Class A common stock that features redemption rights that are either within the control of the holder
or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At
all other times, Class A common stock is classified as stockholders’ equity. Our Class A common stock feature certain redemption
rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, as of
June 30, 2022, and December 31, 2021, 86,250,000 shares of Class A common stock subject to possible redemption is presented at redemption
value as temporary equity, respectively, outside of the stockholders’ equity section of the condensed balance sheets.
We
recognize changes in redemption value immediately as they occur and adjusts the carrying value of the Class A common stock subject to
possible redemption to equal the redemption value at the end of each reporting period. This method would view the end of the reporting
period as if it were also the redemption date for the security. Effective with the closing of the Initial Public Offering, we recognized
the remeasurement from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the
extent available) and accumulated deficit. Subsequent changes in redemption value are recognized and presented as remeasurement of Class
A common stock to redemption value on the accompanying statement of changes in stockholders’ equity (deficit) included in the condensed
financial statements in Part 1 Item 1 of this Form 10-Q.
Net
Income (Loss) Per Share of Common Stock
We
comply with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” We have two classes of shares,
which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes
of shares. Net income (loss) per common share is calculated by dividing the net income by the weighted average shares of common stock
outstanding for the respective period.
The
calculation of diluted net income (loss) per common stock does not consider the effect of the warrants issued in connection with the
Initial Public Offering (including exercise of the over-allotment option) and the Private Placement to purchase an aggregate of 34,395,833
shares of common stock in the calculation of diluted income per share, because their exercise is contingent upon future events.
The
calculation of diluted net income (loss) per common stock for the three and six months ended June 30, 2021 does not consider the effects
of the Class B founder shares no longer subject to forfeiture and as the contingency resolved at the beginning of the period would be
anti-dilutive under the treasury stock method. Remeasurement associated with the redeemable Class A common stock is excluded from earnings
per share as the redemption value approximates fair value.
Recent
Accounting Pronouncements
See
Note 2 to the unaudited condensed financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion
of recent accounting pronouncements.
JOBS
Act
On
April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements
for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply
with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing
to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards
on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our condensed financial
statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective
dates.
Additionally,
we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject
to certain conditions set forth in the JOBS Act, if, as an “emerging growth company”, we choose to rely on such exemptions
we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over
financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (ii) provide all of the compensation disclosure that may be required
of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement
that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional
information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation
related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s
compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our
Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.