10-Q 1 f10q0322_freedom1.htm QUARTERLY REPORT

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2022

 

OR

 

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                   to                  .

 

Commission file number 001-40117

 

FREEDOM ACQUISITION I CORP.

(Exact Name of Registrant as Specified in Its Charter)

 

Cayman Islands   N/A
(State or Other Jurisdiction of
Incorporation or Organization)
  (I.R.S. Employer
Identification Number)

 

14 Wall Street20th Floor

New YorkNew York

10005

(Address of Principal Executive Offices)

 

212-618-1798

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class   Trading Symbol(s)   Name of Each Exchange on Which Registered
Class A ordinary shares, par value $0.0001 per share   FACT   The New York Stock Exchange
Redeemable warrants, each whole warrant exercisable for one ‎Class A ordinary share at an exercise price of $11.50‎   FACT WS   The New York Stock Exchange
Units, each consisting of one Class A ordinary share and one-‎fourth of one redeemable warrant   FACT.U‎   The New York Stock Exchange

 

Securities registered pursuant to Section 12(g) of the Act:

 

None

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities ‎Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), ‎and (2) has been subject to such filing requirements for the past 90 days‎ Yes ☒ No ☐

 

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted ‎pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the ‎Registrant was required to submit such files).‎ Yes ☒ No ☐

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller ‎reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller ‎reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.‎

 

Large accelerated filer  ☐  Accelerated filer ☐ 
Non-accelerated filer  ☒  Smaller reporting company   
    Emerging growth company   

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for ‎complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.‎ 

 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of ‎the Act).‎‎ Yes  No ☐

 

As of May 23, 2022, 34,500,000 Class A ordinary shares, par value $0.0001 per share, ‎and 8,625,000 Class B ordinary shares, par value $0.0001 per share, were issued and outstanding, ‎respectively.‎

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None

 

 

 

 

 

FREEDOM ACQUISITION I CORP.

 

Quarterly Report on Form 10-Q

 

Table of Contents

 

    Page No
PART I. FINANCIAL INFORMATION  
     
Item 1. Financial Statements 1
     
  Condensed Balance Sheets as of March 31, 2022 (Unaudited) and December 31, 2021 1
     
  Unaudited Condensed Statements of Operations for the Three Months Ended March 31, 2022 and for the Three Months Ended March 31, 2021 2
     
  Unaudited Condensed Statements of Changes in Shareholders’ Deficit for the Three Months Ended March 31, 2022 and for the Three Months Ended March 31, 2021 3
     
  Unaudited Condensed Statements of Cash Flows for the Three Months Ended March 31, 2022 and for the Three Months Ended March 31, 2021 4
     
  Notes to Condensed Financial Statements 5
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 23
     
Item 4. Controls and Procedures 23
   
PART II. OTHER INFORMATION  
     
Item 1. Legal Proceedings 25
     
Item 1A. Risk Factors 25
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities 25
     
Item 3. Defaults Upon Senior Securities 26
     
Item 4. Mine Safety Disclosures 26
     
Item 5. Other Information 26
     
Item 6. Exhibits 27
   
SIGNATURES 28

 

i

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

FREEDOM ACQUISITION I CORP.

CONDENSED BALANCE SHEETS

 

   March 31,
2022
   December 31,
2021
 
   (Unaudited)     
Assets        
Current assets:        
Cash  $78,404   $277,583 
Prepaid expenses - short term   658,603    724,066 
Total current assets   737,007    1,001,649 
Prepaid expenses - long term   
    113,073 
Marketable securities held in Trust Account   345,215,544    345,105,681 
Total assets  $345,952,551   $346,220,403 
           
Liabilities, Redeemable Ordinary Shares and Shareholders’ Deficit          
Current liabilities:          
Accounts payable and accrued expenses   3,399,175    2,579,641 
Total current liabilities   3,399,175    2,579,641 
Warrant Liabilities   6,105,583    8,488,250 
Deferred underwriters’ discount payable   12,075,000    12,075,000 
Total Liabilities  $21,579,758   $23,142,891 
           
Commitments and Contingencies (See Note 6)   
 
    
 
 
Class A Ordinary shares subject to possible redemption 34,500,000 and 0 shares subject to possible redemption at redemption value at March 31, 2022 and December 31, 2021   345,000,000    345,000,000 
           
Shareholders’ Deficit:          
Preference shares, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding at March 31, 2022 and December 31, 2021   
    
 
Class A ordinary shares, $0.0001 par value; 200,000,000 shares authorized at March 31, 2022 and December 31, 2021   
    
 
Class B ordinary shares, $0.0001 par value; 20,000,000 shares authorized; 8,625,000 shares issued and outstanding at March 31, 2022 and December 31, 2021   863    863 
Additional paid-in capital   
    
 
Accumulated deficit   (20,628,070)   (21,923,351)
Total shareholders’ deficit   (20,627,207)   (21,922,488)
Total liabilities, Redeemable Ordinary Shares and Shareholders’ Deficit  $345,952,551   $346,220,403 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

1

 

 

FREEDOM ACQUISITION I CORP.

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

 

   For the
Three Months
Ended
March 31,
2022
   For the
Three Months
Ended
March 31,
2021
 
         
Operating costs  $1,198,082   $220,628 
Loss from operations   (1,198,082)   (220,628)
           
Other income/(expense)          
Foreign currency exchange loss   833    
 
Interest income on marketable securities held in Trust Account   109,863    10,352 
Change in fair value of warrant liabilities   2,382,667    4,169,666 
Offering expenses related to warrant issuance   
    (575,278)
Total other income   2,493,363    3,604,740 
           
Net income   $1,295,281   $3,384,112 
           
Weighted average shares outstanding, Class A ordinary shares subject to possible redemption   34,500,000    11,500,000 
Basic and diluted net income per share, Class A ordinary shares subject to possible redemption  $0.03   $0.17 
Weighted average shares outstanding, Class B ordinary shares   8,625,000    8,625,000 
Basic and diluted net income per share, Class B ordinary shares  $0.03   $0.17 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

2

 

 

FREEDOM ACQUISITION I CORP.

UNAUDITED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND MARCH 31, 2021

 

   Ordinary Shares   Additional       Total 
   Class A   Class B   Paid-In   Accumulated   Shareholders’ 
   Shares   Amount   Shares   Amount   Capital   Deficit   Deficit 
Balance as of December 31, 2021   
   $
    8,625,000   $863   $
       —
   $(21,923,351)  $(21,922,488)
Net income       
        
    
    1,295,281    1,295,281 
Balance as of March 31, 2022   
   $
    8,625,000   $863   $
   $(20,628,070)  $(20,627,207)

 

   Ordinary Shares   Additional       Total 
   Class A   Class B   Paid-In   Accumulated   Shareholders’ 
   Shares   Amount   Shares   Amount   Capital   Deficit   (Deficit) Equity 
Balance as of December 31, 2020   
    
    8,625,000   $863   $24,137   $(5,494)  $19,506 
Sale of Units in Initial Public Offering, net of underwriter fee   34,500,000    3,450        
    
    
    3,450 
Cash paid in excess of fair value for private placement warrants       
        
    1,880,000    
    1,880,000 
Class A ordinary shares subject to possible redemption   (34,500,000)   (3,450)       
    
    
    (3,450)
Remeasurement of Class A ordinary shares subject to possible redemption       
        
    (1,904,137)   (27,046,507)   (28,950,644)
Net income       
        
    
    3,384,112    3,384,112 
Balance as of March 31, 2021   
   $
    8,625,000   $863   $
   $(23,667,889)  $(23,667,026)

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

3

 

 

FREEDOM ACQUISITION I CORP.

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

 

  

For the
Three Months

Ended
March 31,
 2022

  

For the
Three Months

Ended
March 31,
 2021

 
Cash Flows from Operating Activities:        
Net income  $1,295,281  $3,384,112 
Adjustments to reconcile net income to net cash used in operating activities:          
Interest earned on marketable securities held in Trust Account   (109,863)   (10,352)
Change in fair value of warrant liabilities   (2,382,667)   (4,169,666)
Offering costs allocated to warrants   
    575,278 
Changes in current assets and current liabilities:          
Prepaid expenses   178,536    (1,407,333)
Accounts payable and accrued expenses   819,534    73,970 
Net cash used in operating activities   (199,179)   (1,553,991)
           
Cash Flows from Investing Activities:          
Investment of Cash into Trust Account   
    (345,000,000)
Net cash used in investing activities   
    (345,000,000)
           
Cash Flows from Financing Activities:          
Proceeds from Initial Public Offering, net of underwriters’ discount   
    338,595,000 
Proceeds from issuance of Private Placement Warrants   
    9,400,000 
Repayment of promissory note to related party        (90,996)
Payments of offering costs   
    (585,420)
Net cash provided by financing activities   
    347,318,584 
           
Net Change in Cash   (199,179)   764,593 
Cash - Beginning   277,583    
 
Cash - Ending  $78,404   $764,593 
           
Supplemental disclosure of noncash financing activities:          
Deferred underwriters’ discount payable charged to additional paid-in capital  $
   $12,075,000 
Initial value of warrant liabilities   
    17,870,000 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

4

 

 

FREEDOM ACQUISITION I CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS

 

Note 1 — Organization and Business Operations

 

Organization and General

 

Freedom Acquisition I Corp. (the “Company”) was incorporated in Cayman Islands on December 23, 2020. The Company was formed for the purpose of entering into a merger, capital share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (a “Business Combination”). The Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.

 

The Company’s sponsor is Freedom Acquisition I LLC, a Cayman Islands limited liability company (the “Sponsor”).

 

As of March 31, 2022, the Company had not yet commenced any operations. All activity through March 31, 2022, relates to the Company’s formation and the Initial Public Offering (“IPO” or “Initial Public Offering”) described below. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO.

 

Financing

 

The registration statement for the Company’s IPO was declared effective on February 25, 2021 (the “Effective Date”). On March 2, 2021, the Company consummated the IPO of 34,500,000 units (the “Units” and, with respect to the Class A ordinary shares included in the Units being offered, the “public share”), at $10.00 per Unit, generating gross proceeds of $345,000,000, which is discussed in Note 3.

 

Simultaneously with the closing of the IPO, the Company consummated the sale of 6,266,667 warrants (the “Private Placement Warrants”), at a price of $1.50 per Private Placement Warrant, which is discussed in Note 4.

 

Transaction costs amounted to $19,175,922 consisting of $6,405,000 of underwriting fee, $12,075,000 of deferred underwriting fee and $695,922 of other offering costs. Of the total transaction cost, $575,278 was expensed as non-operating expenses in that statements of operations with the rest of the offering cost charged to shareholders’ deficit. The transaction costs were allocated based on the relative fair value basis, compared to the total offering proceeds, between the fair value of the public warrant liabilities and the Class A ordinary shares.

 

Trust Account

 

Following the closing of the IPO on March 2, 2021, an amount of $345,000,000 from the net proceeds of the sale of the Units in the IPO and the sale of the Private Placement Warrants was placed in a trust account (“Trust Account”) which is invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company. Except with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its tax obligations, the proceeds from the IPO and the sale of the private placement units will not be released from the Trust Account until the earliest of (a) the completion of the Company’s initial Business Combination, (b) the redemption of any public shares properly submitted in connection with a shareholder vote to amend the Company’s amended and restated certificate of incorporation, and (c) the redemption of the Company’s public shares if the Company is unable to complete the initial Business Combination within 24 months from the closing of the IPO, subject to applicable law. The proceeds deposited in the Trust Account could become subject to the claims of the Company’s creditors, if any, which could have priority over the claims of the Company’s public shareholders.

  

5

 

 

Initial Business Combination

 

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO, although substantially all of the net proceeds are intended to be generally applied toward consummating a Business Combination.

 

The Company’s Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the Trust Account (net of taxes payable) at the time of the signing an agreement to enter into a Business Combination. However, the Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.

 

The Company will provide its public shareholders with the opportunity to redeem all or a portion of their public shares upon the completion of the initial Business Combination either (i) in connection with a shareholder meeting called to approve the initial Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a proposed initial Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The shareholders will be entitled to redeem their shares for a pro rata portion of the amount then on deposit in the Trust Account (initially $10.00 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations).

 

The ordinary shares subject to redemption is recorded at a redemption value and classified as temporary equity upon the completion of the IPO, in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 either immediately prior to or upon consummation of a Business Combination and, if the Company seeks shareholder approval, a majority of the issued and outstanding shares voted are voted in favor of the Business Combination.

 

The Company will have 24 months from the closing of the IPO (with the ability to extend with shareholder approval) to consummate a Business Combination (the “Combination Period”). However, if the Company is unable to complete a Business Combination within the Combination Period, the Company will redeem 100% of the outstanding public shares for a pro rata portion of the funds held in the Trust Account, 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, divided by the number of then outstanding public shares, subject to applicable law and as further described in the registration statement, and then seek to dissolve and liquidate.

 

The Company’s Sponsor, officers and directors have agreed to (i) waive their redemption rights with respect to their founder shares, private placement shares and public shares in connection with the completion of the initial Business Combination, (ii) waive their redemption rights with respect to their founder shares and public shares in connection with a shareholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation, and (iii) waive their rights to liquidating distributions from the Trust Account with respect to their founder shares and private placement shares if the Company fails to complete the initial Business Combination within the Combination Period.

 

The Company’s Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement or Business Combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). However, the Company has not asked its Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether its Sponsor has sufficient funds to satisfy its indemnity obligations and believe that the Company’s Sponsor’s only assets are securities of the Company. Therefore, the Company cannot assure that its Sponsor would be able to satisfy those obligations.

 

6

 

 

Liquidity

 

As of March 31, 2022, the Company had cash outside the Trust Account of $78,404 available for working capital needs. All remaining cash held in the Trust Account are generally unavailable for the Company’s use prior to an initial Business Combination and is restricted for use either in a Business Combination or to redeem ordinary shares. As of March 31, 2022, none of the amount in the Trust Account was available to be withdrawn as described above.

 

The Company may raise additional capital through loans or additional investments from the Sponsor or an affiliate of the Sponsor or certain of its directors and officers. The Sponsor may, but is not obligated to, lend the Company funds, from time to time in whatever amounts it deems reasonable in its sole discretion, to meet the Company’s working capital needs. There can be no assurance that the Company will be able to obtain additional financing, however. Moreover, the Company may need to obtain additional financing either to complete its Business Combination or because the Company becomes obligated to redeem a significant number of its public shares upon consummation of its Business Combination, in which case the Company may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, the Company would only complete such financing simultaneously with the completion of its Business Combination.

 

If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.

 

Going Concern

 

In connection with the Company’s assessment of going concern considerations in accordance with ASC Topic 205-40 Presentation of Financial Statements – Going Concern, pursuant to its Amended and Restated Certificate of Incorporation, the Company has until March 2, 2023 (absent any extensions of such period with shareholder approval) to consummate a Business Combination. If a Business Combination is not consummated by this date, or its shareholders have not approved an extension, there will be a mandatory liquidation and subsequent dissolution of the Company. Although the Company intends to consummate a Business Combination on or before March 2, 2023, and may seek an extension, it is uncertain that the Company will be able to consummate a Business Combination, or obtain an extension, by this time. This, as well as its liquidity condition, raise substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after March 2, 2023.

 

Risks and Uncertainties

 

Management is currently evaluating the impact of the COVID-19 pandemic and Russia-Ukraine war and has concluded that while it is reasonably possible that the virus and war could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Note 2 — Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included in unaudited condensed financial statements prepared in accordance with US GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

 

7

 

 

The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Form 10-K for the year ended December 31, 2021 as filed with the SEC on April 13, 2022, which contains the audited financial statements and notes thereto. The interim results for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future interim periods. 

 

Emerging Growth Company Status

 

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

 

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s unaudited condensed financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

 

Use of Estimates

 

The preparation of unaudited condensed financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

 

8

 

 

Cash and Cash Equivalents

 

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of March 31, 2022 and December 31, 2021.

 

Investments Held in Trust Account

 

At March 31, 2022 and December 31, 2021, the assets held in the Trust Account were held in cash and U.S. Treasury securities. The Company classifies its United States Treasury securities as held-to-maturity in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 320 “Investments—Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost and adjusted for the amortization or remeasurement of premiums or discounts.

 

As of March 31, 2022, investment in the Company’s Trust Account consisted of $928 in cash and $345,214,616 in U.S. Treasury Securities. As of December 31, 2021, investment in the Company’s Trust Account consisted of $484 in cash and $345,105,197 in U.S. Treasury Securities. All of the U.S. Treasury Securities (the “T-bills”) were matured on March 3, 2022 and the Company repurchased new T-bills. The Company considers all investments with original maturities of more than three months but less than one year to be short-term investments. The carrying value approximates the fair value due to its short-term maturity. The carrying value, excluding gross unrealized holding losses and fair value of held to maturity securities on March 31, 2022 and December 31, 2021 are as follows:

 

  

Amortized
Cost
and Carrying
Value

  

Gross

Unrealized

Gains

  

Gross

Unrealized

Losses

   Fair Value
as of
March 31,
2022
 
Cash  $928   $
   $
   $928 
U.S. Treasury Securities   345,214,616    6,154    
    345,220,770 
   $345,215,544   $6,154   $
   $345,221,698 

 

  

Amortized
Cost

and Carrying

Value

  

Gross

Unrealized

Gains

  

Gross

Unrealized

Losses

   Fair Value
as of
December 31,
2021
 
Cash  $484   $
   $
   $484 
U.S. Treasury Securities   345,105,197    
    (6,065)   345,099,132 
   $345,105,681   $
   $(6,065)  $345,099,616 

 

A decline in the market value of held-to-maturity securities below cost that is deemed to be other than temporary, results in an impairment that reduces the carrying costs to such securities’ fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment is other than temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and the duration of the impairment, changes in value subsequent to year-end, forecasted performance of the investee, and the general market condition in the geographic area or industry the investee operates in.

 

Premiums and discounts are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective-interest method. Such amortization and remeasurement are included in the “interest income” line item in the statements of operations. Interest income is recognized when earned.

 

Concentration of Credit Risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. At March 31, 2022 and December 31, 2021, the Company has not experienced losses on this account.

 

9

 

 

Ordinary Shares Subject to Possible Redemption

 

The Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature 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) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ deficit. The Company’s ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of March 31, 2022 and December 31, 2021, 34,500,000 and 0 Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ deficit section of the Company’s balance sheets.

 

Net Income (loss) Per Ordinary Share

 

The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Earnings and losses are shared pro rata between the two classes of shares. The 14,891,667 potential ordinary shares for outstanding warrants to purchase the Company’s shares were excluded from diluted earnings per share for the three months ended March 31, 2022 and March 31, 2021 because the warrants are contingently exercisable, and the contingencies have not yet been met. As a result, diluted net income per ordinary share is the same as basic net income per ordinary share for the periods. The table below presents a reconciliation of the numerator and denominator used to compute basic and diluted net income per share for each class of ordinary share:

 

  

For the Three

Months Ended
March 31, 2022

  

For the Three

Months Ended
March 31, 2021

 
   Class A   Class B   Class A   Class B 
Basic and diluted net income per share:                
Numerator:                
Allocation of net income  $1,036,225   $259,056   $1,933,778   $1,450,334 
Denominator:                    
Weighted average shares outstanding   34,500,000    8,625,000    11,500,000    8,625,000 
Basic and diluted net income per share  $0.03   $0.03   $0.17   $0.17 

 

Offering Costs

 

The Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A - “Expenses of Offering”. Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the Public Offering and that were charged to temporary equity upon the completion of the IPO. Accordingly, on March 31, 2022, offering costs totaling $19,175,922 have been charged to temporary equity (consisting of $6,405,000 of underwriting fee, $12,075,000 of deferred underwriting fee and $695,922 of other offering costs). Of the total transaction cost, $575,278 was reclassed to expense as a non-operating expense in the statements of operations with the rest of the offering cost charged to temporary equity. The transaction costs were allocated based on the relative fair value basis, compared to the total offering proceeds, between the fair value of the public warrant liabilities and the Class A ordinary shares.

 

Fair Value of Financial Instruments

 

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the Financial Accounting Standards Board (“FASB”) ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet.

 

10

 

 

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 share purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. 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 Company accounts for its 14,891,667 ordinary shares warrants issued in connection with its Initial Public Offering (8,625,000) and Private Placement (6,266,667) as derivative warrant liabilities in accordance with ASC 815-40. 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 statements of operations. The fair value of the Private Placement Warrants has been estimated using Monte Carlo simulations at each measurement date. The fair value of the Public Warrants was initially estimated using Monte Carlo simulations. After the Public Warrants were separately traded, the measurement of the Public Warrants used an observable market quote in an active market. 

 

Income Taxes

 

The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

 

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2022 and December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.

 

Recent Accounting Standards

 

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2024 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The guidance was adopted starting January 1, 2022. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.

 

Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.

 

Note 3 — Initial Public Offering

 

Pursuant to the Initial Public Offering, the Company sold 34,500,000 Units, (at a price of $10.00 per Unit. Each Unit consists of one share of Class A Ordinary shares, par value $0.0001 per share one-fourth of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A Ordinary shares at a price of $11.50 per share.

 

11

 

 

All of the 34,500,000 Class A ordinary share sold as part of the Units in the IPO contain a redemption feature which allows for the redemption of such public shares in connection with the Company’s liquidation, if there is a shareholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Company’s certificate of incorporation. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require ordinary share subject to redemption to be classified outside of permanent equity.

 

The Class A ordinary share is subject to SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company recognizes changes in redemption value immediately as they occur. Immediately upon the closing of the IPO, the Company recognized the remeasurement from initial book value to redemption amount value. The change in the carrying value of redeemable ordinary share resulted in charges against additional paid-in capital and accumulated deficit.

 

As of March 31, 2022 and December 31, 2021, the ordinary share reflected on the balance sheets are reconciled in the following table:

 

Gross proceeds from IPO  $345,000,000 
Less:     
Proceeds allocated to Public Warrants   (10,350,000)
Ordinary share issuance costs   (18,600,644)
Plus:     
Remeasurement of carrying value to redemption value   28,950,644 
      
Contingently redeemable ordinary share  $345,000,000 

 

Note 4 — Private Placement Warrants

 

Simultaneously with the closing of the IPO, the Sponsor purchased an aggregate of 6,266,667 Private Placement Warrants at a price of $1.50 per warrant ($9,400,000 in the aggregate), each Private Placement Warrant is exercisable to purchase one share of Class A ordinary shares at a price of $11.50 per share. A portion of the purchase price of the Private Placement Warrants was added to the proceeds from our Initial Public Offering to be held in the Trust Account.

 

The Private Placement Warrants will be identical to the warrants sold in the IPO except that the Private Placement Warrants, so long as they are held by the Sponsor or its permitted transferees, (i) will not be redeemable by the Company, (ii) may not (including the Class A ordinary shares issuable upon exercise of these warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders until 30 days after the completion of the initial Business Combination, (iii) may be exercised by the holders on a cashless basis and (iv) will be entitled to registration rights.

 

Note 5 — Related Party Transactions

 

Founder Shares

 

On December 31, 2020, the Sponsor paid $25,000, or approximately $0.003 per share, to cover certain offering costs in consideration for 7,187,500 Class B ordinary shares, par value $0.0001 per share (the “Founder Shares”). On February 25, 2021, the Company effected a share dividend whereby the Company issued 1,437,500 Class B ordinary shares, resulting in an aggregate of 8,625,000 Class B ordinary shares outstanding. All share and per-share amounts have been retroactively restated to reflect the share dividend.

 

12

 

 

The Company’s initial shareholders have agreed not to transfer, assign or sell any of their Founder Shares and any Class A ordinary shares issuable upon conversion thereof until the earlier to occur of: (i) one year after the completion of the initial Business Combination or (ii) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction after the initial Business Combination that results in all of its shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property; except to certain permitted transferees and under certain circumstances (the “Lock-up”). Any permitted transferees will be subject to the same restrictions and other agreements of the initial shareholders with respect to any Founder Shares. Notwithstanding the foregoing, if (1) the closing price of the Company’s Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination or (2) if the Company consummates a transaction after the initial Business Combination which results in its shareholders having the right to exchange their shares for cash, securities or other property, the Founder Shares will be released from the Lock-up.

 

Promissory Note — Related Party

 

On December 30, 2020, the Sponsor agreed to loan the Company up to $300,000 to cover expenses related to the IPO pursuant to a promissory note (the “Promissory Note”). This loan is non-interest bearing and payable on the earlier of March 31, 2022 or the completion of the IPO. As of March 31, 2022 and December 31, 2021, there was no outstanding amounts under the Promissory Note.

 

Working Capital Loans

 

In addition, in order to finance transaction costs in connection with an intended Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors, may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans. In the event that a Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. After giving effect to the Note described below, up to $1,500,000 of additional Working Capital Loans may be convertible into Private Placement Warrants of the post Business Combination entity at a price of $1.50 per warrant at the option of the lender. Such warrants would be identical to the Private Placement Warrants. Prior to the completion of the initial Business Combination, the Company does not expect to seek loans from parties other than the Sponsor or an affiliate of the Sponsor as the Company does not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in the Company’s Trust Account. As of March 31, 2022 and December 31, 2021, the Company had no borrowings under the Working Capital Loans.

 

On April 1, 2022, the Company issued an unsecured promissory note (the “Note”) in the amount of up to $500,000 to the Sponsor. The proceeds of the Note, which may be drawn down from time to time until the Company consummates the initial Business Combination, will be used for general working capital purposes. The Note bears no interest and is payable in full upon the earlier to occur of (i) twenty-four (24) months from the closing of the Initial Public Offering (or such later date as may be extended in accordance with the terms of our amended and restated memorandum and articles of association) or (ii) the consummation of the Business Combination. A failure to pay the principal within five business days of the date specified above or the commencement of a voluntary or involuntary bankruptcy action shall be deemed an event of default, in which case the Note may be accelerated. Prior to the Company’s first payment of all or any portion of the principal balance of the Note in cash, the Sponsor has the option to convert all, but not less than all, of the principal balance of the Note into private placement warrants (the “Conversion Warrants”), each warrant exercisable for one ordinary share of the Company at an exercise price of $1.50 per share. The terms of the Conversion Warrants would be identical to the Private Placement Warrants. The Sponsor shall be entitled to certain registration rights relating to the Conversion Warrants. The issuance of the Note was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.

 

Administrative Support Service

 

Commencing on the date of the IPO, the Company has agreed to pay the Sponsor up to $10,000 per month for office space and administrative support services. These are paid on a monthly basis via invoices, and there was no amount due under the Administrative Services Agreement as of March 31, 2022. For the three months ended March 31, 2022 and March 31, 2021, the Company did not incur expenses in connection with such services.

 

13

 

 

Note 6 — Commitments & Contingencies

 

Registration Rights

 

The holders of the (i) Founder Shares, which were issued in a private placement prior to the closing of the IPO, (ii) Private Placement Warrants, which will be issued in a private placement simultaneously with the closing of the IPO and the Class A ordinary shares underlying such Private Placement Warrants and (iii) Private Placement Warrants that may be issued upon conversion of Working Capital Loans will have registration rights to require the Company to register a sale of any of its securities held by them pursuant to a registration rights agreement. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the Company’s completion of its initial Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

 

Underwriters Agreement

 

On March 2, 2021, the Company paid a fixed underwriting discount of $6,405,000. Additionally, a deferred underwriting discount of $0.35 per Unit, or $12,075,000 in the aggregate, will be payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes an initial Business Combination, subject to the terms of the underwriting agreement.

 

Note 7 — Shareholder’s Deficit

 

 Preference shares — The Company is authorized to issue a total of 1,000,000 preference shares at par value of $0.0001 each. At March 31, 2022 and December 31, 2021, there were no preference shares issued or outstanding.

 

 Class A Ordinary shares — The Company is authorized to issue a total of 200,000,000 Class A ordinary shares at par value of $0.0001 each. At March 31, 2022 and December 31, 2021, there were 34,500,000 and 0 Class A ordinary shares outstanding, all of which is subject to possible redemption.

 

Class B Ordinary shares — The Company is authorized to issue a total of 20,000,000 Class B ordinary shares at par value of $0.0001 each. At March 31, 2022 and December 31, 2021, there 8,625,000 Class B ordinary shares issued and outstanding, respectively.

 

On December 31, 2020, the Sponsor paid $25,000, or approximately $0.003 per share, to cover certain offering costs in consideration for 7,187,500 Class B ordinary shares, par value $0.0001 per share. On February 25, 2021, the Company effected a share dividend whereby the Company issued 1,437,500 Class B ordinary shares, resulting in an aggregate of 8,625,000 Class B ordinary shares outstanding. All share and per-share amounts have been retroactively restated to reflect the share dividend.

 

Holders of the Class A ordinary shares and holders of the Class B ordinary shares will vote together as a single class on all matters submitted to a vote of the Company’s shareholders, except as required by law; provided that only holders of Class B ordinary shares will have the right to appoint and remove directors in any general meeting held prior to or in connection with the completion of an initial Business Combination. Unless specified in the Company’s amended and restated memorandum and articles of association, or as required by applicable provisions of the Companies Act or applicable stock exchange rules, the affirmative vote of a majority of the Company’s ordinary shares that are voted is required to approve any such matter voted on by its shareholders.

 

The Class B ordinary shares will automatically convert into Class A ordinary shares concurrently with or immediately following the consummation of the initial Business Combination on a one-for-one basis, subject to adjustment for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like, and subject to further adjustment as provided herein. In the case that additional Class A ordinary shares or equity-linked securities are issued or deemed issued in connection with the initial Business Combination, the number of Class A ordinary shares issuable upon conversion of all Founder Shares will equal, in the aggregate, 20% of the total number of Class A ordinary shares outstanding after such conversion (after giving effect to any redemptions of Class A ordinary shares by Public Shareholders), including the total number of Class A ordinary shares issued, or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of the initial Business Combination, excluding any Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued, or to be issued, to any seller in the initial Business Combination and any Private Placement Warrants issued to the Sponsor, officers or directors upon conversion of Working Capital Loans; provided that such conversion of Founder Shares will never occur on a less than one-for-one basis.

 

14

 

 

Note 8 — Warrants

 

The Public Warrants will become exercisable at $11.50 per share on the later of one year from the closing of the IPO and 30 days after the completion of the initial Business Combination; provided in each case that the Company has an effective registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their warrants on a cashless basis under the circumstances specified in the warrant agreement) 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. The warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation. 

 

The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of the initial Business Combination, it will use commercially reasonable efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A ordinary shares issuable upon exercise of the warrants. The Company will use its commercially reasonable efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration or redemption of the warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants is not effective by the 60th day after the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Company’s Class A ordinary shares 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. In such event, each holder would pay the exercise price by surrendering each such warrant for that number of Class A ordinary shares equal to the lesser of (A) the quotient obtained by dividing (x) the product of the number of Class A ordinary shares underlying the warrants, multiplied by the excess of the “fair market value” (defined below) less the exercise price of the warrants by (y) the fair market value and (B) 0.361. The “fair market value” as used in this paragraph shall mean the volume weighted average price of the Class A ordinary shares for the 10 trading days ending on the trading day prior to the date on which the notice of exercise is received by the warrant agent.

 

The exercise price and number of shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend or recapitalization, reorganization, merger or consolidation. In addition, if (x) the Company issues additional Class A ordinary 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 Class A ordinary share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and in the case of any such issuance to the Company’s Sponsors or their affiliates, without taking into account any Founder Shares held by the Company’s initial shareholders or such affiliates, as applicable, prior to such issuance (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the completion of the initial Business Combination (net of redemptions), and (z) the volume-weighted average trading price of the Company’s Class A ordinary shares 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, then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $10.00 and $18.00 per share redemption trigger prices described below under “Redemption of warrants when the price per Class A ordinary share equals or exceeds $10.00” and “Redemption of warrants when the price per Class A ordinary share equals or exceeds $18.00” will be adjusted (to the nearest cent) to be equal to 100% and 180% of the higher of the Market Value and the Newly Issued Price, respectively.

 

15

 

 

Redemption of Warrants When the Price per Class A Ordinary Share Equals or Exceeds $18.00

 

Once the warrants become exercisable, the Company may redeem the outstanding warrants (except with respect to the Private Placement Warrants): 

 

  in whole and not in part;
     
  at a price of $0.01 per warrant;
     
  upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and
     
  if, and only if, the last reported sale price of the Class A ordinary shares for any 20 trading days within a 30-trading day period ending three business days before the Company sends to the notice of redemption to the warrant holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like).

 

Redemption of Warrants When the Price per Class A Ordinary Share Equals or Exceeds $10.00

 

Once 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 determined by reference to an agreed table based on the redemption date and the “fair market value” of the Class A ordinary shares;
  if, and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like); and
     
  if the Reference Value is less than $18.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding public warrants, as described above.

 

Note 9 — Fair Value Measurements

 

Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

 

  Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
     
  Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
     
  Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

16

 

 

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

 

   March 31,   Quoted
Prices In
Active
Markets
   Significant
Other
Observable
Inputs
   Significant
Other
Unobservable
Inputs
 
   2022   (Level 1)   (Level 2)   (Level 3) 
Description                
Investments held in trust account- U.S. Money Market Fund  $928   $928   $
   $
 
Investments held in trust account- U.S. Treasury Securities   345,214,616    
    345,214,616    
 
Total Investments held in Trust Account  $345,215,544   $928   $345,214,616   $
 
                     
Warrant liabilities – Public warrants  $3,536,250   $3,536,250   $
   $
 
Warrant liabilities – Private warrants   2,569,333    
    
    2,569,333 
Total Warrant liabilities  $6,105,583   $3,536,250   $
   $2,569,333 

 

   December 31,
   Quoted
Prices In
Active
Markets
   Significant
Other
Observable
Inputs
   Significant
Other
Unobservable
Inputs
 
   2021   (Level 1)   (Level 2)   (Level 3) 
Description                
Investments held in trust account- U.S. Money Market Fund  $484   $484   $
   $
 
Investments held in trust account- U.S. Treasury Securities   345,105,197    
    345,105,197    
 
Total Investments held in Trust Account  $345,105,681   $484   $345,105,197   $
 
                     
Warrant liabilities – Public warrants  $4,916,250   $4,916,250   $
   $
 
Warrant liabilities – Private warrants   3,572,000    
    
    3,572,000 
Total Warrant liabilities  $8,488,250   $4,916,250   $
   $3,572,000 

 

The Company utilized a Monte Carlo simulation model for the initial valuation of the Public Warrants. The subsequent measurement of the Public Warrants as of March 31, 2022 and December 31, 2021, is classified as Level 1 due to the use of an observable market quote in an active market.

 

The Company utilizes a Monte Carlo simulation model to value the private placement warrants at each reporting period, with changes in fair value recognized in the statements of operations. The estimated fair value of the warrant liability is determined using Level 3 inputs. Inherent in a binomial options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its ordinary shares based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.

 

The aforementioned warrant liabilities are not subject to qualified hedge accounting.

 

There were no transfers between Levels 1, 2 or 3 during the three months ended March 31, 2022 and March 31, 2021, other than the transfer of Public Warrants liabilities from Level 3 to Level 1.

 

17

 

 

The following table provides quantitative information regarding Level 3 fair value measurements:

 

   At
March 31,
2022
   At
December 31,
2021
 
Share price  $9.80   $9.68 
Strike price  $11.50   $11.50 
Term (in years)   0.75    0.50 
Volatility   5.8%   10.5%
Risk-free rate   2.40%   1.30%
Dividend yield   0.0%   0.0%

 

The following table presents the changes in the fair value of warrant liabilities:

 

   Public   Private
Placement
   Warrant
Liabilities
 
             
Fair value as of January 1, 2021  $
   $
   $
 
Initial measurement on March 2, 2021   10,350,000    7,520,000    17,870,000 
Change in valuation inputs or other assumptions   (5,433,750)   (3,948,000)   (9,381,750)
Fair value as of December 31, 2021   4,916,250    3,572,000    8,488,250 
Change in valuation inputs or other assumptions   (1,380,000)   (1,002,667)   (2,382,667)
Fair value as of March 31, 2022  $3,536,250   $2,569,333   $6,105,583 

 

The Company recognized gains in connection with changes in the fair value of warrant liabilities of $2,382,667 and $4,169,666 within change in fair value of warrant liabilities in the Statements of Operations for the three months ended March 31, 2022 and March 31, 2021, respectively.

 

The following table presents a summary of the changes in the fair value of level 3 warrant liabilities:

    Private
Placement
    Public     Total
Warrant
Liabilities
 
Fair value as of January 1, 2021   $     $     $  
Initial measurement on March 2, 2021     7,520,000       10,350,000       17,870,000  
Change in fair value     (1,754,666 )     (2,415,000 )     (4,169,666 )
Fair value as of March 31, 2021     5,765,334       7,935,000       13,700,334  
Transfer to Level 1           (7,935,000 )     (7,935,000 )
Change in fair value     (2,193,334 )           (2,193,334 )
Fair value as of December 31, 2021     3,572,000             3,572,000  
Change in fair value     (1,002,667 )           (1,002,667 )
Fair value as of March 31, 2022   $ 2,569,333     $     $ 2,569,333  

 

Note 10 — Subsequent Events

 

The Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date that the unaudited financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements except as shown below.

 

On April 1, 2022, the Company issued an unsecured promissory note (the “Note”) in the amount of up to $500,000 to the Sponsor. The proceeds of the Note, which may be drawn down from time to time until the Company consummates the initial Business Combination, will be used for general working capital purposes (See Note 5).

 

18

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

References to the “Company,” “our,” “us” or “we” refer to Freedom Acquisition I Corp. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

 

Cautionary Note Regarding Forward-Looking Statements

 

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” 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 as a Cayman Islands exempted company on December 23, 2020 for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. Our sponsor is Freedom Acquisition I LLC, a Cayman Islands limited liability company.

 

The registration statement for our initial public offering (the “Initial Public Offering”) became effective on February 25, 2021. On March 2, 2021, we consummated the Initial Public Offering of 34,500,000 units, which included the exercise of the underwriters’ option to purchase an additional 4,500,000 units at the Initial Public Offering price to cover over-allotments (the “Units”, and, with respect to the Class A ordinary shares included in the Units, the “Public Shares” and, with respect to the one-fourth of one redeemable warrant included in the Units, the “Public Warrants”), at $10.00 per Unit, generating gross proceeds of $345.0 million, and incurring offering costs of approximately $19.18 million, inclusive of approximately $12.08 million in deferred underwriting commissions.

 

Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 6,266,667 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants” and, together with the Public Warrants, the “Warrants”), at a price of $1.50 per Private Placement Warrant with the sponsor, generating gross proceeds of approximately $9.4 million.

 

Upon the closing of the Initial Public Offering and the Private Placement, approximately $345.0 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 having a maturity of 185 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. 

 

19

 

 

If we have not completed a business combination within 24 months from the closing of the Initial Public Offering, or March 2, 2023 (the “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 income taxes, if any (less up to $100,000 of interest to pay dissolution expenses) divided by the number of the then-outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the board of directors, liquidate and dissolve, subject, in each case, to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our outstanding Warrants, which will expire worthless if we fail to consummate a business combination within the Combination Period.

 

Recent Developments

 

We have issued an unsecured promissory note (the “Note”) in the amount of up to $500,000 to our sponsor. The proceeds of the Note, which may be drawn down from time to time until we consummate our initial business combination, will be used for general working capital purposes. The Note bears no interest and is payable in full upon the earlier to occur of (i) twenty-four (24) months from the closing of our initial public offering (or such later date as may be extended in accordance with the terms of our amended and restated memorandum and articles of association) or (ii) the consummation of our business combination. A failure to pay the principal within five business days of the date specified above or the commencement of a voluntary or involuntary bankruptcy action shall be deemed an event of default, in which case the Note may be accelerated. Prior to our first payment of all or any portion of the principal balance of the Note in cash, our sponsor has the option to convert all, but not less than all, of the principal balance of the Note into private placement warrants (the “Conversion Warrants”), each warrant exercisable for one ordinary share of the Company at an exercise price of $1.50 per share. The terms of the Conversion Warrants would be identical to the Private Placement Warrants. Our sponsor shall be entitled to certain registration rights relating to the Conversion Warrants. The issuance of the Note was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.

 

Results of Operations and Known Trends or Future Events

 

We have neither engaged in any operations nor generated any revenues to date. Our only activities since inception have been organizational activities, those necessary to prepare for our Initial Public Offering and identifying a target company for our initial business combination. We do not expect to generate any operating revenues until after completion of our initial business combination. We generate non-operating income in the form of interest income on cash and cash equivalents held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

 

For the three months ended March 31, 2022, we had net income of $1,295,281, which consisted of unrealized gain on change in fair value of warrant liability of $2,382,667 and investment income of $109,863 on our amounts held in the Trust Account, offset by $1,198,082 of operating costs consisting mostly of general and administrative expenses and foreign currency exchange gain of $833.

 

For the three months ended March 31, 2021, we had a net income of $3,384,112, which consisted of unrealized gain on change in fair value of warrant liability of $4,169,666 and investment income of $10,352 on our amounts held in the Trust Account, offset by $220,628 of operating costs consisting mostly of general and administrative expenses and offering expenses related to warrant issuance of $575,278.

 

We classify the Warrants issued in connection with our Initial Public Offering and Private Placement as liabilities at their fair value and adjust the warrant instruments to fair value at each reporting period. These liabilities are subject to remeasurement at each balance sheet date until exercised, and any change in fair value is recognized in our statements of operations. As part of the reclassification to warrant liability, we reclassed a portion of the offering costs associated with the Initial Public Offering originally charged to shareholders’ deficit, to an expense in the statements of operations in the amount of $575,278 based on a relative fair value basis. For the period from the Initial Public Offering to March 31, 2022, the change in fair value of the Warrants was a decrease in the liability of approximately $9,381,750. 

 

20

 

 

Liquidity and Capital Resources

 

As of March 31, 2022, the Company had cash outside the Trust Account of $78,404 in its operating bank accounts, $345,215,544 in marketable securities held in the Trust Account to be used for a business combination, or to repurchase or redeem its stock in connection therewith, and a working capital deficit of $2,662,168. As of March 31, 2022, none of the amount in the Trust Account was available to be withdrawn as described above.

 

The Company may raise additional capital through loans or additional investments from the sponsor or an affiliate of the sponsor or certain of its directors and officers. The sponsor may, but is not obligated to, lend the Company funds, from time to time in whatever amounts it deems reasonable in its sole discretion, to meet the Company’s working capital needs. There can be no assurance that the Company will be able to obtain additional financing, however. Moreover, the Company may need to obtain additional financing either to complete its business combination or because the Company becomes obligated to redeem a significant number of its public shares upon consummation of its business combination, in which case the Company may issue additional securities or incur debt in connection with such business combination. Subject to compliance with applicable securities laws, the Company would only complete such financing simultaneously with the completion of its business combination.

  

If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.

 

Going Concern

 

In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standards Codification (“ASC”) Topic 205-40 Presentation of Financial Statements – Going Concern, pursuant to its Amended and Restated Certificate of Incorporation, the Company has until March 2, 2023 (absent any extensions of such period with shareholder approval) to consummate a business combination. If a business combination is not consummated by this date, or its shareholders have not approved an extension, there will be a mandatory liquidation and subsequent dissolution of the Company. Although the Company intends to consummate a business combination on or before March 2, 2023, and may seek an extension, it is uncertain that the Company will be able to consummate a business combination, or obtain an extension, by this time. This, as well as its liquidity condition, raise substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after March 2, 2023.

 

Contractual Obligations

 

We do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities other than described below.

 

We have an agreement to pay the sponsor a total of up to $10,000 per month for office space, utilities and secretarial and administrative support services. We began incurring these fees on February 25, 2021 and will continue to incur these fees monthly until the earlier of the completion of the business combination and our liquidation.

 

We have an agreement to pay the underwriters of our Initial Public Offering a deferred fee of $12,075,000 in the aggregate, which will become payable to them from the amounts held in the Trust Account solely in the event that we complete a business combination, subject to the terms of the underwriting agreement.

 

Critical Accounting Policies

 

This management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these 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 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. There have been no significant changes in our critical accounting policies as discussed in the Form 10-K filed by us with the SEC on April 13, 2022.

 

21

 

 

Class A Ordinary Shares Subject to Possible Redemption

 

We account for our Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature 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 ordinary shares are classified as shareholders’ deficit. Our Class A ordinary shares 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 March 31, 2022 and December 31, 2021, 34,500,000 Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ deficit section of our balance sheet.

 

Derivative Warrant Liabilities

 

We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued share purchase Warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period.

 

We account for our 14,891,667 Warrants issued in connection with our Initial Public Offering (8,625,000) and Private Placement (6,266,667) as derivative warrant liabilities in accordance with ASC 815-40. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust 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 statements of operations. The fair value of the Private Placement Warrants has been estimated using Monte Carlo simulations at each measurement date. The fair value of the Public Warrants was initially estimated using Monte Carlo simulations. After the Public Warrants were separately traded, the measurement of the Public Warrants used an observable market quote in an active market.

 

Net Income per Ordinary Share

 

We have two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Earnings and losses are shared pro rata between the two classes of shares. The 14,891,667 potential ordinary shares issuable upon the exercise of the Warrants were excluded from diluted earnings per share for the three months ended March 31, 2022 and March 31, 2021 because the Warrants are contingently exercisable, and the contingencies have not yet been met. As a result, diluted net income per ordinary share is the same as basic net income per ordinary share for the periods.

 

22

 

 

Recent Accounting Pronouncements

 

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2024 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The guidance was adopted starting January 1, 2022. Adoption of the ASU did not impact our financial position, results of operations or cash flows.

 

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our unaudited condensed financial statements.

 

Off-Balance Sheet Arrangements

 

As of March 31, 2022 and December 31, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

 

JOBS Act

 

The Jumpstart Our Business Startups Act of 2012 (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, the unaudited 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, (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 CEO’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.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

 

23

 

 

We determined that we had initially recorded our Warrants as equity instruments instead of as liabilities in our balance sheet as of March 2, 2021, which we filed on Form 8-K on March 9, 2021. Our internal control over financial reporting did not result in the proper accounting classification of certain of the warrants we issued in March 2021. This mistake in classification was brought to our attention only when the SEC issued the SEC Statement. The SEC Statement addresses certain accounting and reporting considerations related to warrants of a kind similar to those we issued at the time of our Initial Public Offering in March 2021.

 

On May 28, 2021, the Company filed with the SEC Amendment No. 1 on Form 8-K/A to amend and restate the Company’s audited balance sheet to reflect the classification of the Company’s warrants as a liability, in accordance with the SEC Statement.

 

In addition, as part of a subsequent review of our accounting for more complex equity situations, we also changed our accounting methodology for our Class A ordinary shares subject to possible redemption to be in accordance with guidance in FASB ASC Topic 480 “Distinguishing Liabilities from Equity.” Redeemable equity instruments (including equity instruments that feature redemption rights that are either with the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. Accordingly, we have determined that all of our outstanding Class A ordinary shares should be presented as temporary equity.

 

On December 22, 2021, the Company filed with the SEC Amendment No. 2 on Form 8-K/A to reflect the classification of all of the Company’s Class A ordinary shares as temporary equity in accordance with ASC 480-10-S99.

 

Due to the impact of these errors in the classification of our warrants and Class A ordinary shares, we determined that a material weakness exists in our internal control over financial reporting.

  

As required by Rules 13a-15f and 15d-15 under the Exchange Act, our principal executive officer and principal financial officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2022. Based upon their evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective as of March 31, 2022.

 

Management’s Report on Internal Controls Over Financial Reporting

 

This Quarterly Report on Form 10-Q does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.

 

Changes in Internal Control over Financial Reporting

 

Other than as described herein, there was no change in our internal control over financial reporting that occurred during the period from March 2, 2021 through March 31, 2022, covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Management has identified a material weakness in our internal control over financial reporting related to the accounting of complex financial instruments due to the errors related to the classification of our warrants and Class A ordinary shares, as described above. To respond to this material weakness, we have devoted, and plan to continue to devote, significant effort and resources to the remediation and improvement of our internal control over financial reporting. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance our system of evaluating and implementing the accounting standards that apply to our unaudited condensed financial statements, including through enhanced analyses by our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.

 

24

 

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

None.

 

Item 1A. Risk Factors.

 

As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Annual Report for the year ended December 31, 2021 as filed with the SEC on April 13, 2022. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.

 

Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our business combination and results of operations.

 

We are subject to laws and regulations enacted by national, regional and local governments. In particular, we are required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on the business, investments and results of our operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete our business combination and results of operations.

 

On March 30, 2022, the SEC issued proposed rules (the “2022 Proposed Rules”) relating to, among other items, enhancing disclosures in business combination transactions involving special purpose acquisition companies (“SPACs) and private operating companies; amending the financial statement requirements applicable to transactions involving shell companies; effectively limiting the use of projections in SEC filings in connection with proposed business combination transactions; increasing the potential liability of certain participants in proposed business combination transactions; and the extent to which SPACs could become subject to regulation under the Investment Company Act of 1940. These 2022 Proposed Rules, if adopted, whether in the form proposed or in revised form, and certain positions and legal conclusions expressed by the SEC in connection with the 2022 Proposed Rules may materially adversely affect our ability to negotiate and complete our business combination and may increase the costs and time related thereto.

 

After our initial business combination, substantially all of our assets may be located in a foreign country and substantially all of our revenue will be derived from our operations in such country. Accordingly, our results of operations and prospects will be subject, to a significant extent, to the economic, political and legal policies, developments and conditions in the country in which we operate.

 

The economic, political and social conditions, as well as government policies, of the country in which our operations are located could affect our business. Economic growth could be uneven, both geographically and among various sectors of the economy and such growth may not be sustained in the future. If in the future such country’s economy experiences a downturn or grows at a slower rate than expected, there may be less demand for spending in certain industries. A decrease in demand for spending in certain industries could materially and adversely affect our ability to find an attractive target business with which to consummate our initial business combination and if we effect our initial business combination, the ability of that target business to become profitable.

 

We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine. Our business, financial condition and results of operations may be materially and adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions.

 

Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds.

 

Any of the above mentioned factors could affect our business, prospects, financial condition, and operating results. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in the Prospectus or the Annual Report for the year ended December 31, 2021.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities

 

Use of Proceeds

 

On March 2, 2021, we consummated the Initial Public Offering of 34,500,000 units (the “Units” and, with respect to the Class A ordinary shares included in the Units being offered, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of approximately $345.0 million.

 

25

 

 

In connection with the Initial Public Offering, we incurred offering costs of approximately $19.18 million, inclusive of approximately $12.08 million in deferred underwriting commissions. Other incurred offering costs consisted principally of preparation fees related to the Initial Public Offering. After deducting the underwriting discounts and commissions (excluding the deferred portion, which amount will be payable upon consummation of the Initial Business Combination, if consummated) and the Initial Public Offering expenses, $345.0 million of the net proceeds from our Initial Public Offering and certain of the proceeds from the private placement of the Private Placement Warrants (or $10.00 per Unit sold in the Initial Public Offering) was placed in the Trust Account. The net proceeds of the Initial Public Offering and certain proceeds from the sale of the Private Placement Warrants are held in the Trust Account and invested as described elsewhere in this Quarterly Report on Form 10-Q.

 

There has been no material change in the planned use of the proceeds from the Initial Public Offering and Private Placement as is described in the Company’s final prospectus related to the Initial Public Offering.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

26

 

 

Item 6. Exhibits.

 

Exhibit Number   Description
31.1   Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
31.2   Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1   Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2   Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101.INS   Inline XBRL Instance Document.
     
101.SCH   Inline XBRL Taxonomy Extension Schema Document.
     
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document.
     
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document.
     
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document.
     
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document.
     
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

27

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on this 23rd day of May, 2022.

 

  FREEDOM ACQUISITION I CORP.
     
  By: /s/ Adam Gishen
  Name: Adam Gishen
  Title: Chief Executive Officer

 

 

28

 

 

 

00-0000000 212 618-1798 false --12-31 Q1 0001838987 0001838987 2022-01-01 2022-03-31 0001838987 us-gaap:CommonClassAMember 2022-05-23 0001838987 us-gaap:CommonClassBMember 2022-05-23 0001838987 2022-03-31 0001838987 2021-12-31 0001838987 us-gaap:CommonClassAMember 2022-03-31 0001838987 us-gaap:CommonClassAMember 2021-12-31 0001838987 us-gaap:CommonClassBMember 2022-03-31 0001838987 us-gaap:CommonClassBMember 2021-12-31 0001838987 2021-01-01 2021-03-31 0001838987 us-gaap:CommonClassAMember 2022-01-01 2022-03-31 0001838987 us-gaap:CommonClassAMember 2021-01-01 2021-03-31 0001838987 us-gaap:CommonClassBMember 2022-01-01 2022-03-31 0001838987 us-gaap:CommonClassBMember 2021-01-01 2021-03-31 0001838987 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2021-12-31 0001838987 us-gaap:CommonClassBMember us-gaap:CommonStockMember 2021-12-31 0001838987 us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0001838987 us-gaap:RetainedEarningsMember 2021-12-31 0001838987 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2022-01-01 2022-03-31 0001838987 us-gaap:CommonClassBMember us-gaap:CommonStockMember 2022-01-01 2022-03-31 0001838987 us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-03-31 0001838987 us-gaap:RetainedEarningsMember 2022-01-01 2022-03-31 0001838987 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2022-03-31 0001838987 us-gaap:CommonClassBMember us-gaap:CommonStockMember 2022-03-31 0001838987 us-gaap:AdditionalPaidInCapitalMember 2022-03-31 0001838987 us-gaap:RetainedEarningsMember 2022-03-31 0001838987 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2020-12-31 0001838987 us-gaap:CommonClassBMember us-gaap:CommonStockMember 2020-12-31 0001838987 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001838987 us-gaap:RetainedEarningsMember 2020-12-31 0001838987 2020-12-31 0001838987 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2021-01-01 2021-03-31 0001838987 us-gaap:CommonClassBMember us-gaap:CommonStockMember 2021-01-01 2021-03-31 0001838987 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-03-31 0001838987 us-gaap:RetainedEarningsMember 2021-01-01 2021-03-31 0001838987 us-gaap:CommonClassAMember us-gaap:CommonStockMember 2021-03-31 0001838987 us-gaap:CommonClassBMember us-gaap:CommonStockMember 2021-03-31 0001838987 us-gaap:AdditionalPaidInCapitalMember 2021-03-31 0001838987 us-gaap:RetainedEarningsMember 2021-03-31 0001838987 2021-03-31 0001838987 us-gaap:CommonClassAMember us-gaap:IPOMember 2021-02-25 2021-03-02 0001838987 us-gaap:IPOMember 2021-03-02 0001838987 us-gaap:IPOMember 2021-02-25 2021-03-02 0001838987 us-gaap:WarrantMember 2022-01-01 2022-03-31 0001838987 us-gaap:WarrantMember 2022-03-31 0001838987 us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember 2022-03-31 0001838987 2021-02-25 2021-03-02 0001838987 us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember 2022-01-01 2022-03-31 0001838987 us-gaap:USTreasurySecuritiesMember 2022-03-31 0001838987 us-gaap:USTreasurySecuritiesMember 2021-12-31 0001838987 us-gaap:IPOMember 2022-01-01 2022-03-31 0001838987 us-gaap:PrivatePlacementMember 2022-01-01 2022-03-31 0001838987 us-gaap:CashMember 2022-03-31 0001838987 us-gaap:CashMember 2022-01-01 2022-03-31 0001838987 us-gaap:USTreasurySecuritiesMember 2022-01-01 2022-03-31 0001838987 us-gaap:CashMember 2021-12-31 0001838987 us-gaap:CashMember 2021-01-01 2021-12-31 0001838987 us-gaap:USTreasurySecuritiesMember 2021-01-01 2021-12-31 0001838987 2021-01-01 2021-12-31 0001838987 us-gaap:IPOMember 2022-03-31 0001838987 fact:FounderSharesMember 2020-12-23 2020-12-31 0001838987 fact:FounderSharesMember 2020-12-31 0001838987 us-gaap:CommonClassBMember 2020-12-23 2020-12-31 0001838987 us-gaap:CommonClassBMember 2020-12-31 0001838987 us-gaap:CommonClassBMember 2021-02-25 0001838987 fact:BusinessCombinationMember 2022-03-31 0001838987 2020-12-30 0001838987 us-gaap:PrivatePlacementMember 2022-03-31 0001838987 us-gaap:SubsequentEventMember 2022-03-17 2022-04-01 0001838987 us-gaap:CommonClassAMember 2021-01-01 2021-12-31 0001838987 fact:PublicWarrantsMember 2022-03-31 0001838987 us-gaap:FairValueInputsLevel1Member 2022-01-01 2022-03-31 0001838987 us-gaap:FairValueInputsLevel2Member 2022-01-01 2022-03-31 0001838987 us-gaap:FairValueInputsLevel3Member 2022-01-01 2022-03-31 0001838987 us-gaap:FairValueInputsLevel1Member 2022-03-31 0001838987 us-gaap:FairValueInputsLevel2Member 2022-03-31 0001838987 us-gaap:FairValueInputsLevel3Member 2022-03-31 0001838987 us-gaap:FairValueInputsLevel1Member 2021-01-01 2021-12-31 0001838987 us-gaap:FairValueInputsLevel2Member 2021-01-01 2021-12-31 0001838987 us-gaap:FairValueInputsLevel3Member 2021-01-01 2021-12-31 0001838987 us-gaap:FairValueInputsLevel1Member 2021-12-31 0001838987 us-gaap:FairValueInputsLevel2Member 2021-12-31 0001838987 us-gaap:FairValueInputsLevel3Member 2021-12-31 0001838987 fact:PublicMember 2020-12-31 0001838987 us-gaap:PrivatePlacementMember 2020-12-31 0001838987 us-gaap:WarrantMember 2020-12-31 0001838987 fact:PublicMember 2021-01-01 2021-12-31 0001838987 us-gaap:PrivatePlacementMember 2021-01-01 2021-12-31 0001838987 us-gaap:WarrantMember 2021-01-01 2021-12-31 0001838987 fact:PublicMember 2021-12-31 0001838987 us-gaap:PrivatePlacementMember 2021-12-31 0001838987 us-gaap:WarrantMember 2021-12-31 0001838987 fact:PublicMember 2022-01-01 2022-03-31 0001838987 fact:PublicMember 2022-03-31 0001838987 us-gaap:FairValueInputsLevel3Member us-gaap:PrivatePlacementMember 2020-12-31 0001838987 us-gaap:FairValueInputsLevel3Member fact:PublicMember 2020-12-31 0001838987 us-gaap:FairValueInputsLevel3Member us-gaap:WarrantMember 2020-12-31 0001838987 us-gaap:FairValueInputsLevel3Member us-gaap:PrivatePlacementMember 2021-01-01 2021-03-31 0001838987 us-gaap:FairValueInputsLevel3Member fact:PublicMember 2021-01-01 2021-03-31 0001838987 us-gaap:FairValueInputsLevel3Member us-gaap:WarrantMember 2021-01-01 2021-03-31 0001838987 us-gaap:FairValueInputsLevel3Member us-gaap:PrivatePlacementMember 2021-03-31 0001838987 us-gaap:FairValueInputsLevel3Member fact:PublicMember 2021-03-31 0001838987 us-gaap:FairValueInputsLevel3Member us-gaap:WarrantMember 2021-03-31 0001838987 us-gaap:FairValueInputsLevel3Member us-gaap:PrivatePlacementMember 2021-04-01 2021-12-31 0001838987 us-gaap:FairValueInputsLevel3Member fact:PublicMember 2021-04-01 2021-12-31 0001838987 us-gaap:FairValueInputsLevel3Member us-gaap:WarrantMember 2021-04-01 2021-12-31 0001838987 us-gaap:FairValueInputsLevel3Member us-gaap:PrivatePlacementMember 2021-12-31 0001838987 us-gaap:FairValueInputsLevel3Member fact:PublicMember 2021-12-31 0001838987 us-gaap:FairValueInputsLevel3Member us-gaap:WarrantMember 2021-12-31 0001838987 us-gaap:FairValueInputsLevel3Member us-gaap:PrivatePlacementMember 2022-01-01 2022-03-31 0001838987 us-gaap:FairValueInputsLevel3Member fact:PublicMember 2022-01-01 2022-03-31 0001838987 us-gaap:FairValueInputsLevel3Member us-gaap:WarrantMember 2022-01-01 2022-03-31 0001838987 us-gaap:FairValueInputsLevel3Member us-gaap:PrivatePlacementMember 2022-03-31 0001838987 us-gaap:FairValueInputsLevel3Member fact:PublicMember 2022-03-31 0001838987 us-gaap:FairValueInputsLevel3Member us-gaap:WarrantMember 2022-03-31 xbrli:shares iso4217:USD iso4217:USD xbrli:shares xbrli:pure