UNITED STATES
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 fiscal
quarter ended March 31, 2021
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: 001-39951
Atlantic Avenue Acquisition Corp
(Exact Name of Registrant as Specified in Its Charter)
Delaware
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85-2200249
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(State or
Other Jurisdiction of Incorporation or Organization)
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(I.R.S.
Employer Identification No.)
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2200
Atlantic Street
Stamford, Connecticut
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06902
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(Address of
Principal Executive Offices)
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(Zip
Code)
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Registrant’s telephone number, including area code: (203) 989-9709
N/A
(Former name, former address and former fiscal year, if changed
since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each
Class
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Trading
Symbol(s)
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Name of Each
Exchange on
Which
Registered
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Units, each consisting of one share of Class A common stock
and one-half of one redeemable warrant
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ASAQ.U
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New York Stock Exchange
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Class A common stock, par value $0.0001 per share
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ASAQ
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New York Stock Exchange
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Redeemable warrants, each whole warrant exercisable
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ASAQ WS
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New York Stock Exchange
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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 ☐
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Accelerated Filer ☐
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Non-accelerated Filer ☒
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Smaller Reporting Company ☒
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Emerging Growth Company ☒
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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 June 28, 2021, 25,000,000 shares of Class A common
stock, par value $0.0001 per share, and 6,250,000 shares of Class B
common stock, par value $0.0001 per share, were issued and
outstanding, respectively.
ATLANTIC AVENUE ACQUISITION CORP
Quarterly Report on Form 10-Q
PART I. FINANCIAL
INFORMATION
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Page
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Item 1.
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2
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2
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3
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4
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5
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6
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Item 2.
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19
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Item 3.
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20
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Item 4.
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20
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PART II. OTHER INFORMATION
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Item 1.
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21
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Item 1A.
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21
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Item 2.
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21
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Item 3.
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21
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Item 4.
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21
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Item 5.
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21
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Item 6.
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21
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22
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PART I – FINANCIAL INFORMATION
ITEM 1.
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CONDENSED
FINANCIAL STATEMENTS
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ATLANTIC AVENUE
ACQUISITION CORP
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March
31, 2021
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December 31,
2020
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(unaudited)
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(as
restated)
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Assets
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Cash
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$
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1,438,032
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$
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1,527,662
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Prepaid expense
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206,989
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246,814
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Total current assets
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1,645,021
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1,774,476
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Investments held in Trust Account
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250,008,242
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250,004,549
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Total Assets
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$
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251,653,263
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$
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251,779,025
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Liabilities and Stockholders’ Equity
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Current liabilities:
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Accounts
payable and accrued expenses
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$
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139,848 |
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$
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176,057
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Total current liabilities
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139,848 |
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176,057
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Warrant liabilities
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14,410,400
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21,370,200
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Deferred legal fees
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640,067
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640,067
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Total liabilities
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15,190,315
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22,186,324
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Commitments and Contingencies
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Common stock subject
to possible redemption, 23,146,294 shares and
22,459,270 shares
at redemption value,
respectively
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231,462,940
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224,592,700
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Stockholders’ Equity:
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Preferred stock, $0.0001 par value; 1,000,000 shares authorized;
none issued and outstanding
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-
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-
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Class A common stock, $0.0001 par value; 300,000,000 shares
authorized; 1,853,706 shares and 2,540,730 shares issued and
outstanding (excluding 23,146,294 shares and 22,459,270 shares
subject to possible redemption) at March 31, 2021 and December 31,
2020, respectively
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185
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254
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Class B common stock, $0.0001 par value; 30,000,000 shares
authorized; 6,250,000 shares and 6,250,000 shares issued and
outstanding at March 31, 2021 and December 31, 2020,
respectively
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625
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625
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Additional paid-in capital
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431,465
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7,301,636
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Retained
earnings (accumulated deficit)
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4,567,733
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(2,302,514
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)
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Total stockholders’ equity
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5,000,008
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5,000,001
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Total Liabilities and Stockholders’ Equity
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$
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251,653,263
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$
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251,779,025
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The accompanying notes are an
integral part of these unaudited condensed financial
statements.
ATLANTIC AVENUE ACQUISITION CORP
UNAUDITED
CONDENSED STATEMENT OF
OPERATIONS
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For the Three
Months Ended
March 31,
2021
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Formation and
operating costs
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$
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93,283
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Loss from
operations
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(93,283
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)
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Other income
(expense)
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Interest earned on investments
held in trust
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3,730
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Unrealized gain on change in fair
value of warrants
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6,959,800
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Total other
income (expense)
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6,963,530
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Net
income
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$
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6,870,247
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Basic and diluted weighted
average shares outstanding, Class A common stock
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25,000,000
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Basic and diluted net income per
share, Class A common stock
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$
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0.00
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Basic and diluted weighted
average shares outstanding, Class B common stock
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6,250,000
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Basic and diluted net income per
share, Class B common stock
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$
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1.10
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The
accompanying notes are an integral part of these unaudited
condensed financial statements.
ATLANTIC AVENUE ACQUISITION CORP
UNAUDITED CONDENSED STATEMENT OF CHANGES IN
STOCKHOLDERS’ EQUITY
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Class A Common
Stock
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Class B Common Stock
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Additional
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Retained earnings
(accumulated
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Stockholders'
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Shares
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Amount
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Shares
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Amount
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Paid-in Capital
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Equity (Deficit)
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Balance as of December 31, 2020
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2,540,730
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$
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254
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6,250,000
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$
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625
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$
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7,301,636
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$
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(2,302,514
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)
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$
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5,000,001
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Net
income
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-
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-
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-
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-
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-
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6,870,247
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6,870,247
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Change in shares subject to possible redemption
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(687,024
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)
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(69
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)
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-
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-
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(6,870,171
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)
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-
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(6,870,240
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)
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Balance as of March 31, 2021
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1,853,706
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$
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185
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6,250,000
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$
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625
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$
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431,465
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$
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4,567,733
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$
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5,000,008
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The
accompanying notes are an integral part of these unaudited
condensed financial statements.
ATLANTIC AVENUE ACQUISITION CORP
UNAUDITED CONDENSED STATEMENT OF
CASH FLOWS
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For the three
months ended
March 31,
2021
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Cash
flows from Operating Activities:
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Net
income
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$
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6,870,247
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Adjustments
to reconcile net income to net cash used in operating
activities:
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Interest
earned on investments held in Trust Account
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(3,693
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)
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Unrealized
gain on change in fair value of warrants
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(6,959,800
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)
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Changes in
current assets and current liabilities:
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Prepaid
expense
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39,825
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Accounts
payable and accrued expenses
|
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(36,209
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)
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Net
cash used in operating activities
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(89,630
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)
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Net
change in cash
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(89,630
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)
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Cash,
beginning of the period
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1,527,662
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Cash,
end of the period
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$
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1,438,032
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Supplemental disclosure of noncash investing and financing
activities:
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Change in
value of Class A common stock subject to possible redemption
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$
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6,870,240
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The
accompanying notes are an integral part of these unaudited
condensed financial statements.
ATLANTIC AVENUE
ACQUISITION CORP
NOTES TO
UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1 —
ORGANIZATION AND BUSINESS OPERATIONS
Organization
and General
Atlantic Avenue Acquisition Corp
(formerly known as “Atlantic Street Acquisition Corp”) (the
“Company”) was incorporated in Delaware on July 27, 2020. The
Company is a blank check company and was formed for the purpose of
effecting a merger, capital stock exchange, asset acquisition,
stock purchase, reorganization or similar business combination with
one or more businesses that the Company had not yet identified (the
“Business Combination”). Although the Company is not limited to a
particular industry or geographic region for consummating a
Business Combination, the Company intends to capitalize on the
ability of its management team to identify, acquire and operate a
business that may provide opportunities for attractive
risk-adjusted returns.
The Company is an emerging growth
company and, as such, the Company is subject to all of the risks
associated with emerging growth companies.
As of March 31, 2021, the Company
had not commenced any operations. All activity for the period from
July 27, 2020 (inception) through March 31, 2021, relates to the
Company’s formation and initial public offering (“Public Offering”
or “IPO”), and, since the completion of the Public Offering,
searching for a target to consummate a Business Combination. The
Company will not generate any operating revenues until after the
completion of a Business Combination, at the earliest. The Company
will generate non-operating income in the form of interest income
from the proceeds derived from the Public Offering and placed in
the Trust Account (defined below).
Public Offering
On October 6, 2020, the Company
consummated the Public Offering of 25,000,000 units (the “Units”
and, with respect to the shares of Class A common stock included in
the Units sold, the “Public Shares”), at $10.00 per Unit,
generating gross proceeds of $250,000,000, which is described in
Note 3.
Simultaneously with the closing
of the Public Offering on October 6, 2020, the Company consummated
the sale of an aggregate of 7,000,000 private warrants (the
“Private Placement Warrants”) to Atlantic Avenue Partners LLC (the
“Sponsor”), ASA Co-Investment LLC (“ASA Co-Investment”) and the
Company’s independent directors, generating gross proceeds to the
Company of $7,000,000, which is described in Note 4.
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 IPO. The
Company allocates the offering costs between common stock and
public warrants using relative fair value method, the offering
costs allocated to the public warrants will be expensed immediately
and offering costs associated with equity components will be
charged to stockholders’ equity. Accordingly, as of March 31, 2021,
the Company incurred offering costs in the aggregate of $5,886,260
of which $5,591,035 have been charged to stockholders’ equity and
$295,225 was allocated to the public warrants and was expensed
immediately.
Initial
Business Combination
The Company’s management has
broad discretion with respect to the specific application of the
net proceeds of its Public Offering and Private Placement Warrants,
although substantially all of the net proceeds are intended to be
applied generally toward consummating a Business Combination.
Because the Company’s securities are listed on the New York Stock
Exchange (the “NYSE”), the Company’s initial Business Combination
must be with one or more operating businesses or assets with a fair
market value equal to at least 80% of the assets held in the Trust
Account (net of amounts disbursed to management for working capital
purposes and excluding the amount of any deferred underwriting
discount held in trust) at the time of the Company signing a
definitive agreement in connection with its initial Business
Combination. However, the Company will only complete a Business
Combination if the post-transaction company owns or acquires 50% or
more of the outstanding voting securities of the target or
otherwise acquires a controlling interest in the target sufficient
for it not to be required to register as an investment company
under the Investment Company Act. Upon the closing of the Public
Offering, management has agreed that an amount equal to at least
$10.00 per Unit sold in the Public Offering, including a portion of
the proceeds of the Private Placement Warrants, will be held in a
Trust Account and 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
selected by the Company meeting certain conditions of Rule 2a-7 of
the Investment Company Act, as determined by the Company, until the
earlier of: (i) the completion of a Business Combination and (ii)
the distribution of the Trust Account, as described below.
The Company will provide its
stockholders of Public Shares (“Public Stockholders”) with the
opportunity to redeem all or a portion of their Public Shares upon
the completion of a Business Combination either (i) in connection
with a stockholder meeting called to approve the Business
Combination or (ii) by means of a tender offer. The decision as to
whether the Company will seek stockholder approval of a Business
Combination or conduct a tender offer will be made by the Company.
If, however, stockholder approval of the transaction is required by
applicable law or stock exchange listing requirement, or the
Company decides to obtain stockholder approval for business or
other reasons, it will: (i) conduct the redemptions in conjunction
with a proxy solicitation pursuant to Regulation 14A of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”),
which regulates the solicitation of proxies, and not pursuant to
the tender offer rules; and (ii) file proxy materials with the SEC.
The Public Stockholders will be entitled to redeem their Public
Shares for a pro rata portion of the amount in the Trust Account
(initially approximately $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 for the Company’s tax
obligations, calculated as of two business days prior to the
consummation of the Business Combination. The per-share amount to
be distributed to Public Stockholders who redeem their Public
Shares will not be reduced by the marketing fee the Company will
pay to the underwriters (as discussed in Note 7).
If the Company is unable to
complete a Business Combination within the Combination Period, the
Company will (i) cease all operations except for the purpose of
winding up, (ii) as promptly as reasonably possible but no more
than ten business days thereafter, redeem 100% of the outstanding
Public Shares which redemption will completely extinguish Public
Stockholders’ rights as stockholders (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 stockholders and the Company’s
board of directors, proceed to commence a voluntary liquidation and
thereby a formal dissolution of the Company, subject in each case
to its obligations to provide for claims of creditors and the
requirements of applicable law.
In connection with the redemption
of 100% of the Company’s outstanding Public Shares for a portion of
the funds held in the Trust Account, each holder will receive a
full pro rata portion of the amount then in the Trust Account, plus
any pro rata interest earned on the funds held in the Trust Account
and not previously released to the Company to pay the Company’s
taxes payable (less up to $100,000 of interest to pay dissolution
expenses).
The initial stockholders have
agreed to waive their liquidation rights with respect to the
Founder Shares if the Company fails to complete a Business
Combination within the Combination Period. However, if the initial
stockholders should acquire Public Shares in or after the Public
Offering, they will be entitled to liquidating distributions from
the Trust Account with respect to such Public Shares if the Company
fails to complete a Business Combination within the Combination
Period. The underwriters have agreed to waive their rights to their
marketing fee (see Note 7) held in the Trust Account in the event
the Company does not complete a Business Combination within the
Combination Period and, in such event, such amounts will be
included with the funds held in the Trust Account that will be
available to fund the redemption of the Company’s Public
Shares.
In the event of such
distribution, it is possible that the per share value of the
residual assets remaining available for distribution (including
Trust Account assets) will be only $10.00 per share initially held
in the Trust Account (or less than that in certain circumstances).
In order to protect the amounts held in the Trust Account, the
Sponsor has agreed to be liable to the Company, if and to the
extent any claims by a third party for services rendered or
products sold to the Company, or a prospective target business with
which the Company has discussed entering into a transaction
agreement, reduce the amount of funds in the Trust Account. This
liability will not apply with respect to any claims by a third
party who executed a waiver of any right, title, interest or claim
of any kind in or to any monies held in the Trust Account or to any
claims under the Company’s indemnity of the underwriters of the
Public Offering against certain liabilities, including liabilities
under the Securities Act of 1933, as amended (the “Securities
Act”). Moreover, in the event that an executed waiver is deemed to
be unenforceable against a third party, the Sponsor will not be
responsible to the extent of any liability for such third-party
claims. The Company will seek to reduce the possibility that the
Sponsor will have to indemnify the Trust Account due to claims of
creditors by endeavoring to have all third parties, service
providers (other than the Company’s independent auditors),
prospective target businesses or other entities with which the
Company does business, execute agreements with the Company waiving
any right, title, interest or claim of any kind in or to monies
held in the Trust Account.
Liquidity and Capital
Resources
As of March 31, 2021, the Company
had cash of $1,438,032, and working capital of $1,505,173.
The Company does not believe it
will need to raise additional funds in order to meet the
expenditures required for operating the business. However, if the
estimate of the costs of identifying a target business, undertaking
in-depth due diligence and negotiating a Business Combination are
less than the actual amount necessary to do so, the Company may
have insufficient funds available to operate its business prior to
the Business Combination. Moreover, in addition to the access of
the Working Capital Loans (as defined below in Note 5), the Company
may need to obtain other financing either to complete its Business
Combination or because the Company becomes obligated to redeem a
significant number of the public shares upon consummation of the
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 the Business Combination. If
the Company is unable to complete the Business Combination because
the Company does not have sufficient funds available, the Company
will be forced to cease operations and liquidate the Trust Account.
In addition, following the Business Combination, if cash on hand is
insufficient, the Company may need to obtain additional financing
in order to meet its obligations.
Based on the foregoing,
management believes that the Company will have sufficient working
capital and borrowing capacity from the Sponsor or an affiliate of
the Sponsor, or certain of the Company’s officers and directors to
meet its needs through the earlier of the consummation of a
Business Combination or one year from this filing. Over this time
period, the Company will be using these funds for paying existing
accounts payable, identifying and evaluating prospective initial
Business Combination candidates, performing due diligence on
prospective target businesses, paying for travel expenditures,
selecting the target business to merge with or acquire, and
structuring, negotiating and consummating the Business
Combination.
NOTE 2 — SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited
condensed financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the
United States of America (“GAAP”) for interim financial information
and in accordance with the instructions to Form 10-Q and Article 8
of Regulation S-X of the U.S. Securities and Exchange Commission
(“SEC”). Certain information or footnote disclosures normally
included in financial statements prepared in accordance with GAAP
have been condensed or omitted, pursuant to the rules and
regulations of the SEC for interim financial reporting.
Accordingly, they do not include all the information and footnotes
necessary for a 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.
The accompanying unaudited
condensed financial statements should be read in conjunction with
the Company’s Amendment No. 1 to its Annual Report on Form 10-K/A
for the year ended December 31, 2020, as filed with the SEC on June
15, 2021. The interim results for the three months ended March 31,
2021 are not necessarily indicative of the results to be expected
for the year ending December 31, 2021 or for any future
periods.
Emerging Growth Company
The Company is an “emerging
growth company,” as defined in Section 2(a) of the Securities Act,
as modified by the Jumpstart Our Business Startups Act of 2012 (the
“JOBS Act”), and it may take advantage of certain exemptions from
various reporting requirements that are applicable to other public
companies that are not emerging growth companies including, but not
limited to, not being required to comply with the independent
registered public accounting firm attestation requirements of
Section 404 of the Sarbanes-Oxley Act, reduced disclosure
obligations regarding executive compensation in its periodic
reports and proxy statements, and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and
stockholder approval of any golden parachute payments not
previously approved.
Further, Section 102(b)(1) of the
JOBS Act exempts emerging growth companies from being required to
comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities
Act registration statement declared effective or do not have a
class of securities registered under the Exchange Act) are required
to comply with the new or revised financial accounting standards.
The JOBS Act provides that a company can elect to opt out of the
extended transition period and comply with the requirements that
apply to non-emerging growth companies but any such election to opt
out is irrevocable. The Company has elected not to opt out of such
extended transition period which means that when a standard is
issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company,
can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the
Company’s financial statements with another public company which is
neither an emerging growth company nor an emerging growth company
which has opted out of using the extended transition period
difficult or impossible because of the potential differences in
accounting standards used.
Use of Estimates
The preparation of financial
statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of expenses during the reporting period. Actual
results could differ from those estimates.
One of the more significant
accounting estimates included in these financial statements is the
determination of the fair value of the warrant liability. Such
estimates may be subject to change as more current information
becomes available and accordingly the actual results could differ
significantly from those estimates.
Cash and Cash Equivalents
The Company considers all
short-term investments with an original maturity of three months or
less when purchased to be cash equivalents. The Company did not have any cash
equivalents as of March 31, 2021 and December 31, 2020.
Investments Held in Trust
Account
The Company’s portfolio of
investments held in the Trust Account is comprised of U.S.
government securities, within the meaning set forth in Section
2(a)(16) of the Investment Company Act, with a maturity of 185 days
or less, investments in money market funds that invest in U.S.
government securities, cash, or a combination thereof. The
Company’s investments held in the Trust Account are classified as
trading securities. Trading securities are presented on the balance
sheets at fair value at the end of each reporting period. Gains and
losses resulting from the change in fair value of these securities
is included in gain on Investments Held in Trust Account in the
accompanying statement of operations. The estimated fair values of
investments held in the Trust Account are determined using
available market information. At March 31, 2021, the assets
held in the Trust Account were invested in money market
funds.
Fair Value
Measurements
ASC Topic 820 “Fair Value
Measurements and Disclosures” (“ASC 820”) defines fair value, the
methods used to measure fair value and the expanded disclosures
about fair value measurements. Fair value is the price that would
be received to sell an asset or paid to transfer a liability in an
orderly transaction between the buyer and the seller at the
measurement date. In determining fair value, the valuation
techniques consistent with the market approach, income approach and
cost approach shall be used to measure fair value. ASC 820
establishes a fair value hierarchy for inputs, which represent the
assumptions used by the buyer and seller in pricing the asset or
liability. These inputs are further defined as observable and
unobservable inputs. Observable inputs are those that buyer and
seller would use in pricing the asset or liability based on market
data obtained from sources independent of the Company. Unobservable
inputs reflect the Company’s assumptions about the inputs that the
buyer and seller would use in pricing the asset or liability
developed based on the best information available in the
circumstances.
The fair value hierarchy is
categorized into three levels based on the inputs as follows:
Level 1 —
Valuations based on unadjusted quoted prices in active markets for
identical assets or liabilities that the Company has the ability to
access. Valuation adjustments and block discounts are not being
applied. Since valuations are based on quoted prices that are
readily and regularly available in an active market, valuation of
these securities does not entail a significant degree of
judgment.
Level 2 —
Valuations based on (i) quoted prices in active markets for similar
assets and liabilities, (ii) quoted prices in markets that are not
active for identical or similar assets, (iii) inputs other than
quoted prices for the assets or liabilities, or (iv) inputs that
are derived principally from or corroborated by market through
correlation or other means.
Level 3 —
Valuations based on inputs that are unobservable and significant to
the overall fair value measurement.
The fair value of the Company’s
certain assets and liabilities, which qualify as financial
instruments under ASC 820, “Fair Value Measurements and
Disclosures,” approximates the carrying amounts represented in the
balance sheet. The fair values of cash, prepaid assets, and
accounts payable are estimated to approximate the carrying values
as of March 31, 2021 due to the short maturities of such
instruments.
The Company’s warrant liability
is based on a valuation model utilizing management judgment and
pricing inputs from observable and unobservable markets with less
volume and transaction frequency than active markets. Significant
deviations from these estimates and inputs could result in a
material change in fair value. In some circumstances, the inputs
used to measure fair value might be categorized within different
levels of the fair value hierarchy. In those instances, the fair
value measurement is categorized in its entirety in the fair value
hierarchy based on the lowest level input that is significant to
the fair value measurement. See Note 6 for additional information
on assets and liabilities measured at fair value.
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 Corporation
coverage limits of $250,000. As of March 31, 2021 and December 31,
2020, the Company has not experienced losses on this account and
management believes the Company is not exposed to significant risks
on such account.
Class A Common
Stock Subject to Possible Redemption
The Company accounts for its
common stock subject to possible redemption in accordance with the
guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.”
Common stock subject to mandatory redemption (if any) is classified
as a liability instrument and is measured at fair value.
Conditionally redeemable common stock (including common stock that
feature redemption rights that are either within the control of the
holder or subject to redemption upon the occurrence of uncertain
events not solely within the Company’s control) is classified as
temporary equity. At all other times, common stock is classified as
stockholders’ equity. The Company’s common stock feature certain
redemption rights that is considered to be outside of the Company’s
control and subject to the occurrence of uncertain future events.
Accordingly, 23,146,294 and 22,459,270 shares of Class A common
stock subject to possible redemption is presented at redemption
value as temporary equity, outside of the stockholders’ equity
section of the Company’s balance sheets at March 31, 2021 and
December 31, 2020, respectively.
Net Income Per
Common Share
Net income per common share is
computed by dividing net income by the weighted average number of
shares of common stock outstanding for the period. The calculation
of diluted income per common share does not consider the effect of
the warrants issued in connection with the (i) Public Offering, and
(ii) Private Placement (as defined below in Note 4) since the
exercise of the warrants are contingent upon the occurrence of
future events. As a result, diluted income per common share is the
same as basic income per share for the period presented. The
warrants are exercisable to purchase 19,500,000 shares of Class A
common stock in the aggregate.
The Company’s statement of
operations includes a presentation of income per share of Class A
common stock subject to possible redemption in a manner similar to
the two-class method of income per common share. Net income per
common share, basic and diluted, for redeemable Class A common
stock is calculated by dividing the interest income earned on the
Trust Account, net of applicable franchise and income taxes, by the
weighted average number of shares of redeemable Class A common
stock outstanding since original issuance.
Net income per share of common
stock, basic and diluted, for non-redeemable Class B common stock
is calculated by dividing the net income, adjusted for income
attributable to non-redeemable Class B common stock, by the
weighted average number of shares of non-redeemable Class B common
stock outstanding for the period. Non-redeemable Class B common
stock includes the Founder Shares as these shares do not have any
redemption features and do not participate in the income earned on
the Trust Account.
|
|
For the three
months
ended
|
|
Redeemable
Class A common stock subject to possible redemption
|
|
March 31,
2021
|
|
Numerator:
Net income allocable to Redeemable Class A common stock
|
|
$ |
|
|
Interest
income on investments held in trust account
|
|
|
3,693
|
|
Less:
interest available to be withdrawn for payment of taxes
|
|
|
(3,693 |
) |
Net income
allocable to Redeemable Class A common stock
|
|
$
|
|
|
Denominator:
Weighted Average Redeemable Class A common stock
|
|
|
|
|
Basic and
diluted weighted average shares outstanding, Redeemable Class A
common stock
|
|
|
25,000,000
|
|
Basic and
Diluted net income per share, Redeemable Class A common stock
|
|
$
|
0.00
|
|
|
|
|
|
|
Non-Redeemable Class B common stock
|
|
|
|
|
Numerator:
Net Income minus Redeemable Net Earnings
|
|
|
|
|
Net
Income
|
|
$
|
6,870,247
|
|
Redeemable
Net Earnings
|
|
|
-
|
|
Non-Redeemable Net Income
|
|
$
|
|
|
Denominator:
Weighted Average Non-Redeemable Class B common stock
|
|
|
|
|
Basic and
diluted weighted average shares outstanding, Non-Redeemable Class B
common stock
|
|
|
6,250,000
|
|
Basic and
diluted net income per share, Non-Redeemable Class B common
stock
|
|
$
|
1.10
|
|
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 of legal, accounting, underwriting fees and other costs
incurred in connection with the preparation for the Public
Offering. Offering costs are allocated to the separable financial
instruments issued in the IPO based on a relative fair value basis
compared to total proceeds received. Offering costs associated with
warrant liabilities is expensed, and offering costs associated with
the Class A common stock are charged to the stockholders’
equity.
Derivative
Financial Instruments
The Company evaluates its
financial instruments to determine if such instruments are
derivatives or contain features that qualify as embedded
derivatives in accordance with ASC Topic 815, “Derivatives and
Hedging”. Derivative instruments are recorded at fair value on the
grant date and re-valued at each reporting date, with changes in
the fair value reported in the statements of income. Derivative
assets and liabilities are classified on the balance sheet as
current or non-current based on whether or not net-cash settlement
or conversion of the instrument could be required within 12 months
of the balance sheet date. The Company has determined the warrants
are a derivative instrument.
ASC 470-20, Debt with Conversion
and Other Options addresses the allocation of proceeds from the
issuance of convertible debt into its equity and debt components.
The Company applies this guidance to allocate IPO proceeds from the
Units between common stock and warrants, using the residual method
by allocating IPO proceeds first to fair value of the warrants and
then the common stock.
Income Taxes
The Company complies with the
accounting and reporting requirements of ASC Topic 740, “Income
Taxes,” which requires an asset and liability approach to financial
accounting and reporting for income taxes. Deferred income tax
assets and liabilities are computed for differences between the
financial statement and tax bases of assets and liabilities that
will result in future taxable or deductible amounts, based on
enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation
allowances are established, when necessary, to reduce deferred tax
assets to the amount expected to be realized.
ASC Topic 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’s
management determined that the United States of America is the
Company’s only major tax jurisdiction. 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, 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 may be subject to
potential examination by federal, state and city taxing authorities
in the areas of income taxes. These potential examinations may
include questioning the timing and amount of deductions, the nexus
of income among various tax jurisdictions and compliance with
federal, state and city tax laws. The Company’s management does not
expect that the total amount of unrecognized tax benefits will
materially change over the next twelve months. The Company is
subject to income tax examinations by major taxing authorities
since inception.
Risks and Uncertainties
Management continues to evaluate
the impact of the COVID-19 pandemic and has concluded that while it
is reasonably possible that the virus could have a negative effect
on the Company’s financial position, results of its operations
and/or search for a target company, the specific impact is not
readily determinable as of the date of these financial statements.
The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Recent Accounting
Pronouncements
In August 2020, the FASB issued Accounting Standards Update No.
2020-06, ”Debt --Debt with Conversion and Other Options (Subtopic
470-20)” and “Derivatives and Hedging --Contracts in Entity's Own
Equity (Subtopic 815-40): Accounting for Convertible Instruments
and Contracts in an Entity's Own Equity” (“ASU 2020-06”), which
simplifies accounting for convertible instruments by removing major
separation models required under current GAAP. ASU 2020-06 removes
certain settlement conditions that are required for equity
contracts to qualify for the derivative scope exception and it also
simplifies the diluted earnings per share calculation in certain
areas. ASU 2020-06 is effective for fiscal years beginning after
December 15, 2023, including interim periods within those fiscal
years, with early adoption permitted. The Company adopted ASU
2020-06 effective as of January 1, 2021. The adoption of ASU
2020-06 did not have an impact on the Company's financial
statements.
Management does not believe that any other recently issued, but not
yet effective, accounting standards, if currently adopted, would
have a material effect on the Company's condensed financial
statements.
NOTE 3 — INITIAL PUBLIC
OFFERING
On October 6, 2020, the Company
sold 25,000,000 Units at a price of $10.00 per Unit. Each Unit
consists of one share of Class A common stock, par value $0.0001
per share and one-half of one redeemable warrant (each, a “Public
Warrant”). Each whole Public Warrant entitles the holder to
purchase one share of Class A common stock at a price of $11.50 per
share, subject to adjustment (see Note 8).
The Company paid an underwriting
discount at the closing of the Public Offering of $5,000,000.
Upon the closing of the Public
Offering and Private Placement, $250 million ($10.00 per Unit) of
the net proceeds was placed in a trust account (“Trust
Account”) located in the United States and 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 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, until the
earlier of: (a) the completion of the Company’s initial Business
Combination, (b) the redemption of any public shares properly
submitted in connection with a stockholder 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 October 6, 2020 (the “Combination Period”), the closing
of the Public Offering.
Warrants
As of March 31, 2021, there were
19,500,000 warrants outstanding, including 12,500,000 public
warrants and 7,000,000 private warrants. Public Warrants may only
be exercised for a whole number of shares. No fractional Public
Warrants will be issued upon separation of the Units and only whole
Public Warrants will trade. The Public Warrants will become
exercisable on the later of (a) 30 days after the completion of a
Business Combination and (b) 12 months from the closing of the
Public Offering; provided in each case that the Company has an
effective registration statement under the Securities Act covering
the Class A common stock issuable upon exercise of the Public
Warrants and a current prospectus relating to them is available (or
the Company permits holders to exercise their Public Warrants on a
cashless basis and such cashless exercise is exempt from
registration under the Securities Act). 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, the Company
will use its best efforts to file with the SEC a registration
statement covering the issuance of shares of Class A common stock
issuable upon exercise of the Public Warrants. The Company will use
its best efforts to cause the same to become effective within 60
business days after the closing of the initial Business Combination
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 the Class A common stock, at the time of any
exercise of a warrant, is not listed on a national securities
exchange such that it satisfies the definition of a “covered
security” under Section (18)(b)(1) of the Securities Act, the
Company may require warrant holders who exercise their warrants to
do so on a “cashless basis” in accordance with Section 3(a)(9) of
the Securities Act or another exemption. The Public Warrants will
expire five years after the completion of a Business Combination or
earlier upon redemption or liquidation. There will be no redemption
rights or liquidating distributions with respect to the Company’s
warrants, which will expire worthless if the Company fails to
complete a Business Combination within the Combination
Period.
The Private Placement Warrants
are identical to the Public Warrants underlying the Units sold in
the Public Offering, except that (i) the Private Placement Warrants
and the Class A common stock issuable upon exercise of the Private
Placement Warrants will not be transferable, assignable or salable
until 30 days after the completion of a Business Combination,
subject to certain limited exceptions, (ii) the Private Placement
Warrants will be non-redeemable (except under scenario 2 below) so
long as they are held by the initial purchasers or such purchasers’
permitted transferees, (iii) the Private Placement Warrants may be
exercised by the holders on a cashless basis, and (iv) the Private
Placement Warrants and the Class A common stock issuable upon
exercise of the Private Placement Warrants are entitled to
registration rights. If the Private Placement Warrants are held by
someone other than the initial stockholders or their permitted
transferees, the Private Placement Warrants will be redeemable by
the Company in all redemption scenarios and exercisable by such
holders on the same basis as the Public Warrants.
With respect to Private Placement
Warrants held by ASA Co-Investment, they will not be exercisable
more than five years from the commencement of sales of the offering
in accordance with FINRA Rule 5110(g)(8)(c).
The Company may call the Public
Warrants for redemption:
1.
|
For
cash:
|
|
■
|
in whole and
not in part;
|
|
■
|
at a price
of $0.01 per warrant;
|
|
■
|
upon a
minimum of 30 days’ prior written notice of redemption; and
|
|
■
|
if, and only
if, the last reported sale price of the Class A common stock equals
or exceeds $18.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for any
20 trading days within a 30-trading day period ending on the third
trading day prior to the date on which the Company sends the notice
of redemption to the warrant holders.
|
|
|
2.
|
For class A
common stock (commencing 90 days after the warrants become
exercisable):
|
|
■
|
in whole and
not in part;
|
|
■
|
at $0.10 per
warrant upon a minimum of 30 days’ prior written notice of
redemption provided that holders will be able to exercise their
warrants on a cashless basis prior to redemption and receive that
number of shares of Class A common stock to be determined by
reference to a table included in the warrant agreement, based on
the redemption date and the fair market value of Class A common
stock;
|
|
■
|
if, and only
if, the last reported sale price of the Class A common stock equals
or exceeds $10.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) on the
trading day prior to the date on which the Company sends the notice
of redemption to warrant holders;
|
|
■
|
if, and only
if, the Private Placement Warrants are also concurrently exchanged
at the same price (equal to a number of shares of Class A common
stock) as the outstanding Public Warrants; and
|
|
■
|
if, and only
if, there is an effective registration statement covering the
issuance of the shares of Class A common stock issuable upon
exercise of the warrants and a current prospectus relating thereto
available throughout the 30-day period after written notice of
redemption is given.
|
If the Company calls the Public
Warrants for redemption under scenario 1 above, management will
have the option to require all holders that wish to exercise the
Public Warrants to do so on a “cashless basis,” as described in the
warrant agreement.
The exercise price and number of
Class A common stock 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. If the Company issues additional shares of common
stock or equity-linked securities for capital raising purposes in
connection with the closing of the initial Business Combination at
a newly issued price of less than $9.20 per share of common stock,
then the exercise price of the warrants will be adjusted to be
equal to 115% of the newly issued price. Additionally, in no event
will the Company be required to net cash settle the warrants
shares. If the Company is unable to complete a Business Combination
within the Combination Period and the Company liquidates the funds
held in the Trust Account, holders of warrants will not receive any
of such funds with respect to their warrants, nor will they receive
any distribution from the Company’s assets held outside of the
Trust Account with the respect to such warrants. In such a
situation, the warrants would expire worthless.
NOTE 4 — PRIVATE PLACEMENT
Simultaneously with the closing
of the Public Offering, the Sponsor purchased an aggregate of
3,950,000 warrants (“Private Placement Warrants”), ASA
Co-Investment purchased an aggregate of 2,750,000 Private Placement
Warrants and the Company’s independent directors purchased an
aggregate of 300,000 Private Placement Warrants, at a price of
$1.00 per unit, for an aggregate purchase price of $7,000,000 (the
“Private Placement”). A portion of the proceeds from the Private
Placements were added to the net proceeds from the Public Offering
held in the Trust Account.
Each Private Placement Warrant is
exercisable to purchase one share of Class A common stock at $11.50
per share.
NOTE 5 — RELATED PARTY
TRANSACTIONS
Founder Shares
On August 5, 2020, the Company
issued an aggregate of 7,187,500 shares of Class B common stock to
the Sponsor and ASA Co-Investment (the “Founder Shares”) in
exchange for an aggregate capital contribution of $25,000. The
Founders had agreed to forfeit an aggregate of up to 937,500
Founder Shares to the extent that the over-allotment option was not
exercised in full by the underwriters. On November 16, 2020,
the over-allotment option expired unexercised, hence, 937,500
Founder Shares were forfeited.
The initial stockholders have
agreed, subject to limited exceptions, not to transfer, assign or
sell any of their Founder Shares 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 the Company’s
stockholders having the right to exchange their Class A common
stock for cash, securities or other property; except to certain
permitted transferees and under certain circumstances (the
“lock-up”). Notwithstanding the foregoing, if (1) the closing price
of Class A common stock equals or exceeds $12.00 per share (as
adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within any
30-trading day period commencing at least 150 days after the
initial Business Combination or (2) if the Company consummates a
transaction after the initial Business Combination which results in
the Company’s stockholders 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
The Sponsor and ASA Co-Investment
agreed to loan the Company an aggregate of up to $300,000 to be
used for the payment of costs related to the Public Offering (the
Sponsor up to $182,143 and ASA Co-Investment up to $117,857). The
promissory notes were non-interest bearing, unsecured and due on
the earlier of June 30, 2021 and the closing of the Public
Offering.
The Company borrowed $183,143
under the promissory notes and repaid the amount in full on the
consummation of the IPO. The loan was repaid out of the
offering proceeds not held in the Trust Account.
Working
Capital Loans
In addition, in order to finance
transaction costs in connection with a Business Combination, the
Sponsor may, but is not obligated to, loan the Company funds as may
be required (“Working Capital Loans”). If the Company completes a
Business Combination, the Company may repay the Working Capital
Loans out of the proceeds of the Trust Account released to the
Company. Otherwise, the Working Capital Loans may be repaid only
out of funds held outside the Trust Account. In the event that a
Business Combination does not close, the Company may use a portion
of proceeds held outside the Trust Account to repay the Working
Capital Loans but no proceeds held in the Trust Account would be
used to repay the Working Capital Loans, other than the interest on
such proceeds that may be released for working capital purposes.
Except for the foregoing, the terms of such Working Capital Loans,
if any, have not been determined and no written agreements exist
with respect to such loans. The Working Capital Loans would either
be repaid upon consummation of a Business Combination, without
interest, or, at the lender’s discretion, up to $1,500,000 of such
Working Capital Loans may be convertible into warrants of the post
Business Combination entity at a price of $1.00 per warrant. The
warrants would be identical to the Private Placement Warrant. As of
March 31, 2021 and December 31, 2020, no Working Capital Loans were
outstanding.
Administrative Services
Agreement
The Company has agreed,
commencing on October 1, 2020 through the earlier of the Company’s
consummation of a Business Combination or its liquidation, to pay
an affiliate of the Sponsor a monthly fee of $10,000 for office
space, administrative and support services. Upon completion of the
initial Business Combination or the Company’s liquidation, the
Company will cease paying these monthly fees. For the period from
July 27, 2020 (inception) through March 31, 2021, the Company has
not been invoiced nor has it paid any fees for these
services.
NOTE 6 — RECURRING FAIR VALUE
MEASUREMENTS
Warrant Liability
At March 31, 2021 and December
31, 2020, the Company’s warrant liability was valued at $14,410,400
and $21,370,200, respectively. Under the guidance in ASC 815-40 the
warrants do not meet the criteria for equity treatment. As such,
the warrants must be recorded on the balance sheet at fair value.
This valuation is subject to re-measurement at each balance sheet
date. With each re-measurement, the warrant valuation will be
adjusted to fair value, with the change in fair value recognized in
the Company’s statement of operations.
Recurring Fair Value Measurements
The following tables present
information about the Company’s assets and liabilities that were
measured at fair value on a recurring basis as of March 31, 2021
and December 31, 2020, and indicate the fair value hierarchy of the
valuation techniques the Company utilized to determine such fair
value.
|
|
March 31,
|
|
|
Quoted
Prices In
Active
Markets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Other
Unobservable
Inputs
|
|
|
|
2021
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Money Market
funds held in Trust Account
|
|
$
|
250,008,242
|
|
|
$
|
250,008,242
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
$
|
250,008,242
|
|
|
$
|
250,008,242
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant
Liabilities—Public Warrants
|
|
$
|
9,250,000
|
|
|
$
|
9,250,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Warrant
Liabilities—Private Placement Warrants
|
|
|
5,160,400
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,160,400
|
|
|
|
$
|
14,410,400
|
|
|
$
|
9,250,000
|
|
|
$
|
-
|
|
|
$
|
5,160,400
|
|
The following table presents information about the Company’s
assets and liabilities that were measured at fair value on a
recurring basis as of December 31, 2020, and indicates the fair
value hierarchy of the valuation techniques the Company utilized to
determine such fair value.
|
|
December 31,
|
|
|
Quoted
Prices In
Active
Markets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant Other Unobservable Inputs |
|
|
|
2020
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3) |
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Money
Market funds held in Trust Account
|
|
$ |
250,004,549
|
|
|
$ |
250,004,549
|
|
|
$ |
-
|
|
|
$ |
-
|
|
|
|
$
|
250,004,549
|
|
|
$
|
250,004,549
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant
Liabilities—Public Warrants
|
|
$
|
13,750,000
|
|
|
$
|
13,750,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Warrant
Liabilities—Private Placement Warrants
|
|
|
7,620,200
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,620,200
|
|
|
|
$
|
21,370,200
|
|
|
$
|
13,750,000
|
|
|
$
|
-
|
|
|
$
|
7,620,200
|
|
The following table sets forth a
summary of the changes in the fair value of the warrant liability
for the period from July 27,
2020 (Inception) through March 31, 2021:
|
|
Public
Warrant
Liabilities
|
|
|
Private
Placement
Warrant
Liabilities
|
|
|
Warrant
Liabilities
|
|
Fair value as of July 27, 2020 (Inception)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Initial fair value of warrant liability upon issuance at October 6,
2020 (initial measurement)
|
|
|
12,538,750
|
|
|
|
7,000,000
|
|
|
|
19,538,750
|
|
Revaluation of warrant liability included in other income within
the statement of income for the period from October 6, 2020
(initial measurement) through December 31, 2020
|
|
|
1,211,250
|
|
|
|
620,200
|
|
|
|
1,831,450
|
|
Fair value as of December 31, 2020
|
|
$
|
13,750,000
|
|
|
$
|
7,620,200
|
|
|
$
|
21,370,200
|
|
Revaluation of warrant liability included in other income within
the statement of income for the period from December 31, 2020
through March 31, 2021
|
|
|
(4,500,000
|
)
|
|
|
(2,459,800
|
)
|
|
|
(6,959,800
|
)
|
Fair value as of March 31, 2021
|
|
$
|
9,250,000
|
|
|
$
|
5,160,400
|
|
|
$
|
14,410,400
|
|
The Private
Placement Warrants were initially valued at purchase price, since
the Company noted that the Private Placement Warrants were
purchased substantially concurrently with the consummation of the
IPO on the Valuation Date, providing a robust indication of fair
value given the transaction in the Private Placement Warrants
occurred on or about the Valuation Date. At December 31, 2020 and
at March 31, 2021, the Private Placement Warrants were valued using
a Monte Carlo Model. The Private Placement Warrants are considered
to be a Level 3 fair value measurements due to the use of
unobservable inputs. The Monte Carlo Model’s primary unobservable
input utilized in determining the fair value of the Private
Placement Warrants is the expected volatility of the common stock.
The expected volatility as of December 31, 2020 and as of March 31,
2021 was derived from the historical volatility of similar SPACs at
a similar stage in their life cycle.
A Monte Carlo Simulation Method
was used in estimating the fair value of the public warrants for
periods where no observable traded price was available, using the
same expected volatility as was used in measuring the fair value of
the Private Warrants. For periods subsequent to the detachment of
the warrants from the Units, including December 31, 2020 and March
31, 2021, the closing price of the public warrants was used as the
fair value as of each relevant date.
Transfers to/from Levels 1, 2 and
3 are recognized at the end of the reporting period. There were no
transfers between levels during the three-month period ending March
31, 2021.
The key inputs into the
Monte Carlo simulation for the Public and Private Placement
Warrants were as follows:
Input
|
|
December
31, 2020
|
|
|
March 31, 2021
|
|
Stock price
|
|
$
|
10.05
|
|
|
$
|
9.69
|
|
Exercise price
|
|
$
|
11.50
|
|
|
$
|
11.50
|
|
Risk free rate
|
|
|
0.93
|
%
|
|
|
1.04
|
%
|
Trading days per year
|
|
|
252
|
|
|
|
252
|
|
Annual volatility
|
|
|
15.0
|
%
|
|
|
13.25
|
%
|
Time to exercise (years)
|
|
|
5.50
|
|
|
|
5.25
|
|
The following table provides a reconciliation of changes in fair
value balance for warrants classified as Level 3 from December 31,
2020 to March 31, 2021:
|
|
Warrant
Liabilities
|
|
Fair value as of December 31,2020
|
|
$
|
7,620,200
|
|
Transfers to/(from) Level 3
|
|
|
-
|
|
Revaluation of warrant liability included in other income within
the statement of income for the period from December 31, 2020
through March 31, 2020
|
|
|
(2,459,000
|
)
|
Fair value as of March 31, 2021
|
|
$
|
5,160,400
|
|
The Company’s use of models
required the use of subjective assumptions:
|
• |
The expected term was determined
to be 5.75 years assuming the Company takes nine months after the
valuation date to complete a business combination. An increase in
the expected term, in isolation, would result in an increase in the
fair value measurement of the warrant liabilities and vice
versa.
|
|
• |
The expected volatility
assumption was based on the implied volatility from a set of
comparable publicly-traded warrants as determined based on the size
and proximity of other similar SPACs at a similar stage in their
life cycle. An increase in the expected volatility, in isolation,
would result in an increase in the fair value measurement of the
warrant liabilities and vice versa.
|
NOTE 7 — COMMITMENTS AND
CONTINGENCIES
Registration Rights
The holders of the Founder Shares
and Private Placement Warrants and warrants that may be issued upon
conversion of Working Capital Loans (and any Class A common stock
issuable upon the exercise of the Private Placement Warrants and
warrants that may be issued upon conversion of Working Capital
Loans) will be entitled to registration rights pursuant to a
registration rights agreement to be signed prior to or on the
closing date of the Public Offering. The holders of these
securities are entitled to make up to three demands (ASA
Co-Investment will be entitled to one demand in accordance with
FINRA Rules), excluding short form demands, that the Company
register such securities. In addition, the holders have certain
“piggy-back” registration rights with respect to registration
statements filed subsequent to the consummation of a Business
Combination. However, the registration rights agreement provides
that the Company will not permit any registration statement filed
under the Securities Act to become effective until termination of
the applicable lock-up period. The Company will bear the expenses
incurred in connection with the filing of any such registration
statements. Notwithstanding the foregoing, ASA Co-Investment may
not exercise its demand or “piggyback” registration rights after
five and seven years, respectively, after the effective date of the
registration statement related to the Public Offering and may not
exercise its demand rights on more than one occasion. The Company
will bear the expenses incurred in connection with the filing of
any such registration statements.
The Company granted the
underwriters a 45-day option beginning October 6, 2020 to purchase
up to an additional 3,750,000 units to cover over-allotments, if
any. On November 16, 2020, the over-allotment option was
terminated.
On October 6, 2020, the
underwriters were paid a cash underwriting fee of $5,000,000, which
constituted 2% of the gross proceeds of the Public Offering.
Business Combination Marketing Agreement
The Company has engaged the
underwriters as an advisor in connection with a Business
Combination to assist the Company in holding meetings with its
stockholders to discuss the potential Business Combination and the
target business’ attributes, introduce the Company to potential
investors that are interested in purchasing the Company’s
securities in connection with a Business Combination, assist the
Company in obtaining stockholder approval for the Business
Combination and assist the Company with its press releases and
public filings in connection with the Business Combination. The
Company will pay the underwriters a cash fee for such services, yet
to be performed, upon the consummation of a Business Combination in
an amount equal to, in the aggregate, 3.5% of the gross proceeds of
Public Offering, including any proceeds from the full or partial
exercise of the over-allotment option.
Deferred legal
fees
The Company obtained legal
advisory services in connection with the Public Offering and agreed
to pay approximately $640,067 of their fees upon the consummation
of the initial Business Combination, which was recorded as deferred
legal fees in the accompanying balance sheet. Such fees will not be
paid in the event the Company does not complete an initial Business
Combination.
NOTE 8 — STOCKHOLDERS’ EQUITY
Preferred Stock —
The Company is authorized to issue a total of 1,000,000 shares of
preferred stock at par value of $0.0001 each. As of March 31, 2021
and December 31, 2020,
there were no preferred shares issued or outstanding.
Class A Common
Stock — The Company is authorized to issue a total of
300,000,000 shares of Class A common stock at par value of $0.0001
each. Holders of the Company’s Class A common stock are entitled to
one vote for each share on each matter on which they are entitled
to vote. As of March 31, 2021 and December 31, 2020, there were
1,853,706 and 2,540,730 shares of Class A common stock issued and
outstanding, excluding 23,146,294 and 22,459,270 shares of Class A
common stock subject to possible redemption, respectively.
Class B Common
Stock — The Company is authorized to issue a total of
30,000,000 shares of Class B common stock at par value of $0.0001
each. Holders of the Company’s Class B common stock are entitled to
one vote for each share on each matter on which they are entitled
to vote. As of March 31, 2021 and December 31, 2020, there were
6,250,000 shares of Class B common stock issued and outstanding.
The Class B common stock will automatically convert into Class A
common stock at the time of the consummation of the initial
Business Combination, or earlier at the option of the holder, on a
one-for-one basis.
Only holders of the Founder
Shares will have the right to elect all of the Company’s directors
prior to the initial Business Combination. Otherwise, holders of
Class A common stock and Class B common stock will vote together as
a single class on all matters submitted to a vote of stockholders
except as required by law or the applicable rules of the NYSE then
in effect.
In the case that additional Class
A common stock, or equity-linked securities, are issued or deemed
issued in excess of the amounts sold in the Public Offering and
related to the closing of the initial Business Combination, the
ratio at which the Class B common stock shall convert into Class A
common stock will be adjusted (unless the holders of a majority of
the outstanding Class B common stock agree to waive such
anti-dilution adjustment with respect to any such issuance or
deemed issuance) so that the number of Class A common stock
issuable upon conversion of all Class B common stock will equal, in
the aggregate, 20% of the sum of the total number of all common
stock outstanding upon the completion of the Public Offering plus
all Class A common stock and equity-linked securities issued or
deemed issued in connection with the initial Business Combination,
excluding any shares or equity-linked securities issued, or to be
issued, to any seller in the initial Business Combination.
NOTE 9 —
SUBSEQUENT EVENTS
The Company evaluated subsequent
events and transactions that occurred after the balance sheet date
up to the date that the condensed financial statements were issued.
Based on this review, the Company did not identify any subsequent
events that would have required recognition or disclosure in the
condensed financial statements.
ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
|
References
to the “Company,” “us,” “our” or “we” refer to Atlantic Avenue
Acquisition Corp. The following discussion and analysis of our
financial condition and results of operations should be read in
conjunction with our unaudited condensed financial statements and
related notes included herein.
Cautionary Note Regarding Forward-Looking Statements
All
statements other than statements of historical fact included in
this Report including, without limitation, statements under this
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” regarding the Company’s financial position,
business strategy and the plans and objectives of management for
future operations, are forward- looking statements. When used in
this Report, words such as “anticipate,” “believe,” “estimate,”
“expect,” “intend” and similar expressions, as they relate to us or
the Company’s management, identify forward-looking statements. Such
forward-looking statements are based on the beliefs of management,
as well as assumptions made by, and information currently available
to, the Company’s management. Actual results could differ
materially from those contemplated by the forward- looking
statements as a result of certain factors detailed in our filings
with the SEC. All subsequent written or oral forward-looking
statements attributable to us or persons acting on the Company’s
behalf are qualified in their entirety by this paragraph.
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.
Overview
We are a
recently incorporated blank check company incorporated as a
Delaware corporation and formed for the purpose of effecting a
merger, capital stock exchange, asset acquisition, stock purchase,
reorganization or similar business combination with one or more
businesses, which we refer to throughout this report as our initial
business combination. We have not selected any business combination
target and we have not, nor has anyone on our behalf, initiated any
substantive discussions, directly or indirectly, with any business
combination target.
In September
2020, our independent directors purchased, in advance, an aggregate
of 300,000 private placement warrants, at a price of $1.00 per
warrant, for an aggregate purchase price of $300,000.
Simultaneously with the closing of the Initial Public Offering,
Atlantic Avenue Partners LLC (the “sponsor”) purchased an aggregate
of 3,950,000 private placement warrants and ASA Co-Investment LLC
(“ASA Co-Investment”) purchased an aggregate of 2,750,000 private
placement warrants at a price of $1.00 per warrant, for an
aggregate purchase price of $6,700,000. A portion of the $7,000,000
proceeds from the private placements were added to the net proceeds
from the Initial Public Offering held in the trust account.
As of March
31, 2021 we held cash of $1,438,032 and deferred legal fees of
$640,067. Further, we expect to continue to incur significant costs
in the pursuit of our acquisition plans. We cannot assure you that
our plans to raise capital or to complete our initial business
combination will be successful.
Results of Operations
Our entire
activity since inception up to March 31, 2021 relates to our
formation, the Initial Public Offering and, since the closing of
the Initial Public Offering, a search for a Business Combination
candidate. We will not be generating any operating revenues until
the closing and completion of our initial Business Combination, at
the earliest.
For the
three months ended March 31, 2021, we had net income of $
$6,870,247, which consisted of $3,730 in interest earned on
marketable securities held in the Trust Account and cash held in
the working capital account, and $6,959,800 in unrealized gain on
change in fair value of warrants, offset by $93,283 in formation
and operating costs.
Liquidity and Capital Resources
As of March
31, 2021, we had cash of $1,438,032, and working capital of
$1,505,173.
We do not
believe we will need to raise additional funds in order to meet the
expenditures required for operating the business. However, if the
estimate of the costs of identifying a target business, undertaking
in-depth due diligence and negotiating a Business Combination are
less than the actual amount necessary to do so, we may have
insufficient funds available to operate our business prior to the
Business Combination. Moreover, in addition to the access of the
Working Capital Loans (as defined in Note 5 to the Company's Notes
to the Unaudited Condensed Financial Statements), we may need to
obtain other financing either to complete our Business Combination
or because we become obligated to redeem a significant number of
the public shares upon consummation of our Business Combination, in
which case we may issue additional securities or incur debt in
connection with such Business Combination. Subject to compliance
with applicable securities laws, we would only complete such
financing simultaneously with the completion of the Business
Combination. If we are unable to complete the Business Combination
because we do not have sufficient funds available, we will be
forced to cease operations and liquidate the Trust Account. In
addition, following the Business Combination, if cash on hand is
insufficient, we may need to obtain additional financing in order
to meet our obligations.
Based on the
foregoing, management believes that we will have sufficient working
capital and borrowing capacity from the Sponsor or an affiliate of
the Sponsor, or certain of our officers and directors to meet the
needs through the earlier of the consummation of a Business
Combination or one year from this filing. Over this time period, we
will be using these funds for paying existing accounts payable,
identifying and evaluating prospective initial Business Combination
candidates, performing due diligence on prospective target
businesses, paying for travel expenditures, selecting the target
business to merge with or acquire, and structuring, negotiating and
consummating the Business Combination.
Critical Accounting Policies and Estimates
The
preparation of the 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. We have identified the
following as our critical accounting policies:
Common Stock Subject to Possible Redemption
The Company
accounts for its common stock subject to possible redemption in
accordance with the guidance in Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common
stock subject to mandatory redemption (if any) is classified as a
liability instrument and is measured at fair value. Conditionally
redeemable common stock (including common stock that feature
redemption rights that are either within the control of the holder
or subject to redemption upon the occurrence of uncertain events
not solely within the Company’s control) is classified as temporary
equity. At all other times, common stock is classified as
stockholders’ equity. The Company’s common stock features certain
redemption rights that are considered to be outside of the
Company’s control and subject to the occurrence of uncertain future
events. Accordingly, common stock subject to possible redemption is
presented at redemption value as temporary equity, outside of the
stockholders’ equity section of the Company’s balance sheet.
Net
Income Per Common Share
Net income
per common share is computed by dividing net income by the weighted
average number of common shares outstanding for each of the
periods. The calculation of diluted income per common share does
not consider the effect of the warrants issued in connection with
the (i) IPO, and (ii) Private Placement since the exercise of the
warrants are contingent upon the occurrence of future events. The
warrants are exercisable to purchase 19,500,000 shares of common
stock in the aggregate.
Derivative Warrant
Liabilities
We do not use derivative instruments to hedge exposures to
cash flow, market, or foreign currency risks. We evaluate all of
our financial instruments, including issued stock purchase
warrants, to determine if such instruments are derivatives or
contain features that qualify as embedded derivatives, pursuant to
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.
We issued 12,500,00 warrants to purchase shares of Class A
common stock to investors in our Initial Public Offering and issued
7,000,000 private placement warrants. All of our outstanding
warrants are recognized as derivative 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 statement of operations.
The private placement warrants were initially valued at their
purchase price ($1.00 per warrant). Their value as of March 31,
2021 was determined using a Monte Carlo Simulation. The public
warrants were initially valued using a Monte Carlo Simulation.
Their value as of March 31, 2021 was determined based on the
closing market price of the public warrants as of that date.
Off-Balance Sheet Arrangements
As of March
31, 2021, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
|
As of March
31, 2021, we were not subject to any market or interest rate risk.
Following the consummation of our Initial Public Offering, the net
proceeds received into the Trust Account, have been invested in
U.S. government treasury bills, notes or bonds with a maturity of
180 days or less or in certain money market funds that invest
solely in US treasuries. Due to the short-term nature of these
investments, we believe there will be no associated material
exposure to interest rate risk.
ITEM 4. |
CONTROLS AND
PROCEDURES
|
Disclosure
controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in our
reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported within the time periods
specified in the SEC’s rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed in our
reports filed or submitted under the Exchange Act is accumulated
and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, to allow timely decisions
regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As required
by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief
Executive Officer and Chief Financial Officer carried out an
evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures as of March 31, 2021. Based upon
their evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures (as
defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act)
were not effective as of March 31, 2021 due solely to the material
weakness in our internal control over financial reporting to the
classification of the Company’s Warrants as components of equity
instead of as derivative liabilities.
Changes in Internal Control Over Financial Reporting
During the
most recently completed fiscal quarter, there has been no change in
our internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, our
internal control over financial reporting as the circumstances that
led to the revision of our financial statements had not yet been
identified. In light of the material weakness, we plan to enhance
our processes to identify and appropriately apply applicable
accounting requirements to better evaluate and understand the
nuances of the complex accounting standards that apply to our
financial statements. Our plans at this time include providing
enhanced access to accounting literature, research materials and
documents and increased communication among our personnel and
third-party professionals with whom we consult regarding complex
accounting applications. The elements of our remediation plan can
only be accomplished over time, and we can offer no assurance that
these initiatives will ultimately have the intended effects.
PART
II – OTHER INFORMATION
ITEM 1. |
LEGAL
PROCEEDINGS.
|
None.
Factors that
could cause our actual results to differ materially from those in
this report include the risk factors described in our Amendment No.
1 to our Annual Report on Form 10-K/A filed with the SEC on June
15, 2021. As of the date of this Report, other than as described
below, there have been no material changes to the risk factors
disclosed in the Amendment No. 1 to our Annual Report on Form
10-K/A filed with the SEC on June 15, 2021.
ITEM 2. |
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
|
None.
ITEM 3. |
DEFAULTS UPON
SENIOR SECURITIES.
|
None.
ITEM 4. |
MINE SAFETY
DISCLOSURES.
|
Not
applicable.
ITEM 5. |
OTHER
INFORMATION.
|
None.
The
following exhibits are filed as part of, or incorporated by
reference into, this Quarterly Report on Form 10-Q.
No.
|
|
Description of Exhibit
|
|
|
Certification of Principal Executive Officer Pursuant to
Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
Certification of Principal Financial Officer Pursuant to
Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
Certification of Principal Executive Officer Pursuant to 18
U.S.C. Section 1350, as adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
|
Certification of Principal 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*
|
|
XBRL Instance Document
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB*
|
|
XBRL Taxonomy Extension Labels Linkbase Document
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
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.
|
ATLANTIC
AVENUE ACQUISITION CORP
|
|
|
Date: June 28, 2021
|
By:
|
/s/ Ashok Nayyar
|
|
|
Ashok Nayyar
|
|
|
Chief Executive Officer
(Principal
Executive Officer)
|
|
ATLANTIC
AVENUE ACQUISITION CORP
|
|
|
Date: June 28, 2021
|
By:
|
/s/ Barry Best
|
|
|
Barry Best
|
|
|
Chief Financial Officer
(Principal
Financial and Accounting Officer)
|
22