Real-time Form 4 intelligence. Smarter insider tracking.
YoY shift: Lean +
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.27pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.27pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.27pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
liquidation+3
liquidate+3
difficult+2
inability+2
adverse+2
Positive rising
able+2
attractive+1
gain
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
liquidation+2
cancelled+2
cease+2
cautionary+1
limitation+1
Positive rising
empower+1
MD&A (Item 7)
4,111 words
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
As a smaller reporting company under Rule 12b-2 of the Exchange Act, we are not required to include risk factors in this Report. However, below is a partial list of material risks, uncertainties and other factors that could have a material effect on the Company and its operations:
we are a blank check company with no revenue or basis to evaluate our ability to select a suitable business target;
we may not be able to select an appropriate target business or businesses and complete our initial business combination in the prescribed time frame, including the Near Business Combination;
our expectations around the performance of a prospective target business or businesses, such as Near, may not be realized;
we may not be successful in retaining or recruiting required officers, key employees or directors following our initial business combination;
our officers and directors may have difficulties allocating their time between the Company and other businesses and may potentially have conflicts of interest with our business or in approving our initial business combination;
we may not be able to obtain additional financing to complete our initial business combination, including the Near Business Combination, or reduce the number of shareholders requesting redemption;
we may issue our shares to investors in connection with our initial business combination at a price that is less than the prevailing market price of our shares at that time;
you may not be given the opportunity to choose the initial business target or to vote on the initial business combination;
trust account funds may not be protected against third party claims or bankruptcy;
an active market for our public securities may not develop and you will have limited liquidity and trading;
the availability to us of funds from interest income on the trust account balance may be insufficient to operate our business prior to the business combination;
our financial performance following a business combination with an entity may be negatively affected by their lack of an established record of revenue, cash flows and experienced management;
risks and uncertainties related to the software and technology industries;
there may be more competition to find an attractive target for an initial business combination, which could increase the costs associated with completing our initial business combination and may result in our inability to find a suitable target;
changes in the market for directors and officers liability insurance could make it more difficult and more expensive for us to negotiate and complete an initial business combination;
our ability to consummate an initial business combination, such as the Near Business Combination, may be adversely affected by economic uncertainty and volatility in the financial markets;
we may engage one or more of our underwriters or one of their respective affiliates to provide additional services to us after the initial public offering, which may include acting as a financial advisor in connection with an initial business combination or as placement agent in connection with a related financing transaction. Our underwriters are entitled to receive deferred underwriting commissions that will be released from the trust account only upon a completion of an initial business combination. These financial incentives may cause them to have potential conflicts of interest in rendering any such additional services to us after the initial public offering, including, for example, in connection with the sourcing and consummation of an initial business combination;
we may attempt to complete our initial business combination with a private company, such as Near, about which little information is available, which may result in a business combination with a company that is not as profitable as we suspected, if at all;
our warrants are accounted for as derivative liabilities and are recorded at fair value upon issuance with changes in fair value each period reported in earnings, which may have an adverse effect on the market price of our common stock or may make it more difficult for us to consummate an initial business combination;
since our initial stockholders will lose their entire investment in us if our initial business combination is not completed (other than with respect to any public shares they may acquire during or after the initial public offering), and because our sponsor, officers and directors may profit substantially even under circumstances in which our public stockholders would experience losses in connection with their investment, a conflict of interest may arise in determining whether a particular business combination target is appropriate for our initial business combination;
changes in laws or regulations or how such laws or regulations are interpreted or applied, or a failure to comply with any laws or regulations, may adversely affect our business, including our ability to negotiate and complete our initial business combination, and results of operations;
the value of the founder shares following completion of our initial business combination is likely to be substantially higher than the nominal price paid for them, even if the trading price of our common stock at such time is substantially less than $10.00 per share;
resources could be wasted in researching acquisitions that are not completed, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we have not completed our initial business combination within the Combination Period, our public stockholders may receive only approximately $10.00 per share, or less than such amount in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless;
in March 2022, the SEC issued proposed rules relating to certain activities of SPACs. Certain of the procedures that we, a potential business combination target, or others may determine to undertake in connection with such proposals may increase our costs and the time needed to complete our initial business combination and may constrain the circumstances under which we could complete an initial business combination. The need for compliance with such proposals may cause us to liquidate the funds in the trust account or liquidate the Company at an earlier time than we might otherwise choose;
if we are deemed to be an investment company for purposes of the Investment Company Act, we would be required to institute burdensome compliance requirements and our activities would be severely restricted. As a result, in such circumstances, unless we are able to modify our activities so that we would not be deemed an investment company, we may abandon our efforts to complete an initial business combination and instead liquidate the Company;
to mitigate the risk that we might be deemed to be an investment company for purposes of the Investment Company Act, on January 11, 2023, we liquidated the investments held in the trust account and instead hold the funds in the trust account in an interest bearing demand deposit account until the earlier of the consummation of our initial business combination or our liquidation. As a result, following the liquidation of investments in the trust account, we likely will receive less interest on the funds held in the trust account, which would likely reduce the dollar amount our public stockholders would receive upon any redemption or liquidation of the Company;
we may potentially be subject to U.S. foreign investment regulations which may impose conditions on or limit certain investors’ ability to purchase our securities or otherwise participate in the Business Combination, potentially making the securities less attractive to investors. Our future investments in U.S. companies may also be subject to U.S. foreign investment regulations;
we may not be able to complete an initial business combination with certain potential target companies, including Near, if a proposed transaction with the target company may be subject to review or approval by regulatory authorities pursuant to certain U.S. or foreign laws or regulations, including the Committee on Foreign Investment in the United States;
recent increases in inflation and interest rates in the United States and elsewhere could make it more difficult for us to consummate an initial business combination;
military conflict in Ukraine or elsewhere may lead to increased price volatility for publicly traded securities, which could make it more difficult for us to consummate an initial business combination;
a 1% U.S. federal excise tax may be imposed on us in connection with our redemptions of shares in connection with a business combination or other stockholder vote pursuant to which stockholders would have a right to submit their shares for redemption;
there is substantial doubt about our ability to continue as a “going concern”; and
we have identified a material weakness in our internal control over financial reporting as of December 31, 2022. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
We currently maintain all of our working capital cash and cash equivalents with one financial institution and, therefore, our cash and cash equivalents could be adversely affected if the financial institution in which we hold our cash and cash equivalents fails.
We currently maintain all of our working capital cash and cash equivalents with one financial institution. At the current time, our cash balance with such financial institution is below the Federal Deposit Insurance Corporation insurance (“FDIC Insurance”) limit. As a result of the recent inability of certain businesses with accounts at Silicon Valley Bank to gain access to their deposits and the greater focus on the concerns of potential failures of other financial institutions, in the future, we may consider diversifying a portion of our cash and cash equivalents with other financial institutions in order to reduce the risks associated with maintaining all of our cash and cash equivalents at one financial institution. Notwithstanding the foregoing, the failure of one or more of the financial institutions in which our cash and cash equivalents are held, the resulting inability for us to obtain the return of our funds from any of those financial institutions, or any other adverse condition suffered by any of those financial institutions, could impact access to our cash or cash equivalents and could impact our operating liquidity and financial performance.
For the complete list of risks relating to our operations, see the section titled “Risk Factors” contained in our IPO Registration Statement,(ii) Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on April 12, 2022, (iii) Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, as filed with the SEC on May 16, 2022, (iv) Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, as filed with the SEC on August 16, 2022, and (v) the Definitive Proxy Statement on Schedule 14A filed in connection with the Second Extension, as filed with the SEC on December 19, 2022. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risks could arise that may also affect our business or ability to consummate an initial business combination. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
For risks related to Near and the Near Business Combination, please see the Near Registration Statement.
All statements other than statements of historical fact included in this Report including, without limitation, statements in this section regarding our 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 our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our 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 our 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 consolidated financial statements and the notes thereto contained elsewhere in this Report.
Overview
We are a blank check company formed under the laws of the State of Delaware on September 24, 2020, for the purpose of effecting a business combination with one or more businesses. We intend to effectuate our business combination using cash from the remaining proceeds of the initial public offering and the sale of the private placement warrants, our capital stock, debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a business combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from September 24, 2020 (inception) through December 31, 2022 were organizational activities, those necessary to prepare for the initial public offering and subsequent to the initial public offering, identifying a target company for a business combination and subsequent to entering into the Merger Agreement, pursuing the completion of the Near Business Combination. We do not expect to generate any operating revenues until after the completion of our business combination. We generate non-operating income in the form of interest income and unrealized gains on marketable securities held in a trust account, and gains or losses from the change in fair value of the warrant liabilities and the Working Capital Loan. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the year ended December 31, 2022, we had net income of $5,032,569, which consists of change in fair value of the warrant liabilities of $7,205,710, change in fair value of the Working Capital Loan of $341,057, and interest earned on marketable securities held in the trust account of $1,760,120, partially offset by formation and operational costs of $3,900,302 and provision for income taxes of $374,016.
For the year ended December 31, 2021, we had a net loss of $406,026, which consists of the change in fair value of the warrant liabilities of $1,642,290, unrealized gain on marketable securities held in trust account of $2,211 and interest earned on marketable securities held in the trust account of $78,398, offset by formation and operational costs of $1,605,912 and transaction costs allocated to warrant liabilities of $523,013.
Near Business Combination
On May 18, 2022, we entered into the Near Merger Agreement with Near, Merger Sub 1 and Merger Sub 2. Near, a global leader in privacy-led data intelligence, curates one of the world’s largest sources of intelligence on people, places and products. Near processes data from over 1.6 billion unique user IDs, in over 70 million places across 44 countries to empower marketing and operational data leaders to confidently reach, understand and market to consumers and optimize their business results. Near has offices in Los Angeles, Silicon Valley, Paris, Bangalore, Singapore, Sydney and Tokyo. Near serves major enterprises in retail, real estate, restaurants, tourism, technology, marketing and other industries. Pursuant to the Near Merger Agreement, at the closing of the transactions contemplated by the Near Merger Agreement, (i) Merger Sub 1 and Near will consummate the First Merger (as defined in the Near Merger Agreement), pursuant to which Merger Sub 1 will be merged with and into Near, with Near continuing as the surviving corporation and a wholly owned subsidiary of the Company, as a result of which all of the issued and outstanding capital stock of Near will no longer be outstanding and will automatically be cancelled and will cease to exist in exchange for the right to receive the Merger Consideration (as defined in the Near Merger Agreement), and (ii) Near, as the surviving corporation and a wholly owned subsidiary of the Company after the First Merger, will merge with and into Merger Sub 2, with Merger Sub 2 continuing as the surviving entity, as a result of which all of the issued and outstanding capital stock of Near will no longer be outstanding and will automatically be cancelled and will cease to exist and each membership interest of Merger Sub 2 will remain outstanding as a membership interest of the surviving entity. Following the Near Business Combination, the Company will change its name to “Near Intelligence, Inc.”, or such other name as may be mutually agreed to by the Company and Near.
For a full description of the Near Merger Agreement and the proposed Near Business Combination, please see “Item 1. Business.”
Extensions
On July 7, 2022, the Company’s stockholders approved the First Extension, extending the date by which the Company must consummate its initial business combination from July 11, 2022 to January 11, 2023 (or such earlier date, subject to certain conditions of the Near Merger Agreement, as determined by the board of directors). In connection with the First Extension, the Company issued two promissory notes in the aggregate principal amount of up to $2,060,070, pursuant to which the sponsor and Near loaned the Company an aggregate of $2,060,070 and deposited into the trust account to cover the six months of extension payments (each in the amount of $343,345) paid in connection with the First Extension.
On January 6, 2023, the Company’s stockholders approved the Second Extension, extending the date by which the Company must consummate its initial business combination from January 11, 2023 to April 11, 2023 (or such earlier date as determined by the board of directors). If the Company’s initial business combination, such as the Near Business Combination, is not consummated by April 11, 2023, then the Company’s existence will terminate, and the Company will distribute the remaining amounts in the trust account as provided in the Company’s amended and restated certificate of incorporation.
In connection with the First Extension, the Company’s stockholders holding 6,845,606 public shares exercised their right to redeem such shares for a pro rata portion of the funds in the trust account. As a result, $68,488,348 (approximately $10.00 per share) was removed from the trust account to pay such holders. In connection with the Second Extension, stockholders holding 9,786,530 public shares exercised their right to redeem their shares for a pro rata portion of the funds in the trust account. As a result, approximately $101 million (approximately $10.32 per public share) was removed from the trust account to pay such holders and approximately $6.376 million remained in the trust account. Following redemptions, the Company has 617,864 public shares outstanding as of the date of this Annual Report.
For a full description of the First Extension and Second Extension, please see “Item 1. Business.”
Liquidity and Going Concern
On January 11, 2021, we consummated the initial public offering of 17,250,000 units, at a price of $10.00 per unit, which included the full exercise by the underwriters of their over-allotment option in the amount of 2,250,000 units, generating gross proceeds of $172,500,000. Simultaneously with the closing of the initial public offering, we consummated the sale of 5,200,000 private placement warrants to the sponsor at a price of $1.00 per private placement warrant generating gross proceeds of $5,200,000.
Following the initial public offering, the full exercise of the over-allotment option, and the sale of the private placement warrants, a total of $172,500,000 was placed in the trust account. We incurred $14,303,235 in transaction costs, including $3,450,000 of underwriting fees, $6,037,500 of deferred underwriting fees, $4,411,238 of fair value of the Founder Shares attributable to the anchor investor and $404,497 of other offering costs.
For the year ended December 31, 2022, net cash used in operating activities was $2,103,271. Net income of $5,032,569 was affected by change in fair value of the warrant liabilities of $7,205,710, change in fair value of the Working Capital Loan of $341,057, deferred tax provision of $71,622 and interest earned on marketable securities held in the trust account of $1,760,120. Changes in operating assets and liabilities provided $2,099,425 of cash for operating activities primarily because of the increase in accounts payable and accrued expenses.
For the year ended December 31, 2021, net cash used in operating activities was $970,669. Net loss of $406,026 was affected by change in fair value of the warrant liabilities of $1,642,290, interest earned on marketable securities held in the trust account of $78,398, transaction costs allocated to warrants of $523,013 and an unrealized gain on marketable securities held in trust account of $2,211. Changes in operating assets and liabilities provided $635,243 of cash for operating activities.
At December 31, 2022, we had cash and marketable securities held in the trust account of $107,332,749 (including approximately $1,228,739 of interest income, including unrealized loss) consisting of U.S. treasury bills with a maturity of 185 days or less. Interest income on the balance in the trust account may be used by us to pay taxes. Through December 31, 2022, we had withdrawn $579,359 of interest earned from the trust account to pay for the Company’s previously unpaid and accrued tax obligations.
We intend to use substantially all of the funds held in the trust account and any additional funds available under the financing arrangement described in Note 5 to the accompanying consolidated financial statements, including any amounts representing interest earned on the trust account (less deferred underwriting commissions and income taxes payable), to complete our business combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
At December 31, 2022, we had cash of $101,161 and borrowing capacity under the Working Capital Loan of $275,000. As of December 31, 2022, $1,225,000 was borrowed under the Working Capital Loan. The fair value of the note as of December 31, 2022 was $421,900. We intend to use the funds held outside the trust account and this borrowing capacity primarily for completing the Company’s business combination.
Subsequent to December 31, 2022, the Sponsor advanced the Company $275,000.
The Company’s liquidity needs prior to the consummation of the initial public offering were satisfied through the proceeds of $25,000 from the sale of Founder Shares, and loans from the sponsor of approximately $89,000. The loan was repaid in full on January 11, 2021. Subsequent to the consummation of the initial public offering, the Company’s liquidity has been satisfied through the net proceeds received from the consummation of the initial public offering, the sale of private placement warrants, and the Working Capital Loan.
In order to fund working capital deficiencies or finance transaction costs in connection with a business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, make Working Capital Loans. Such Working Capital Loans would be evidenced by promissory notes. If we complete a business combination, we may repay the notes out of the proceeds of the trust account released to us. In the event that a business combination does not close, we may use a portion of the working capital held outside the trust account to repay the notes, but no proceeds from our trust account would be used for such repayment. On January 21, 2022, we issued a promissory in the principal amount of up to $1,500,000 to our sponsor. The note is non-interest bearing and payable upon the consummation of a business combination or may be convertible into warrants of the post-business combination entity at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the private placement warrants (see Note 8 to the accompanying consolidated financial statements). As of December 31, 2022, the Company had drawn $1,225,000 on the Working Capital Loan and had $275,000 available to draw.
As indicated in the accompanying consolidated financial statements, at December 31, 2022, the Company had $101,161 in cash, $107,332,749 in cash and marketable securities held in the trust account to be used for a business combination or to repurchase or redeem its common stock in connection therewith and working capital deficit of $4,570,315, which excludes $125,394 of interest earned on the trust account which is available to pay Delaware franchise taxes payable and income taxes payable. As of December 31, 2022, $1,228,739 of the amount on deposit in the trust account represented interest income, which is available to pay the Company’s tax obligations.
Until the consummation of a business combination, the Company has used and will be using the funds not held in the trust account and any additional funds available under the financing arrangement described below for completing the Company’s business combination.
In connection with the Company’s assessment of going concern considerations in accordance with FASB’s ASC Subtopic 205-40, “Presentation of Financial Statements – Going Concern,” the Company has until April 11, 2023, to consummate an initial business combination. It is uncertain that the Company will be able to consummate an initial business combination by this time. If an initial business combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Additionally, the Company may not have sufficient liquidity to fund the working capital needs of the Company through one year from the issuance of these consolidated financial statements. Management has determined that the liquidity condition and mandatory liquidation, should an initial business combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after April 11, 2023.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2022. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any capital lease obligations, operating lease obligations or long-term liabilities.
The underwriters are entitled to a deferred fee of $0.35 per unit, or $6,037,500 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the trust account solely in the event that we complete a business combination, subject to the terms of the underwriting agreement.
On January 21, 2022, the Company issued a promissory note with respect to the Working Capital Loans in the principal amount of up to $1,500,000 to the Sponsor. The Working Capital Loan is non-interest bearing and payable upon the consummation of a Business Combination or may be convertible into warrants of the post-Business Combination entity at a price of $1.00 per warrant at the lender’s discretion. As of December 31, 2022, $1,225,000 was borrowed under the Working Capital Loan. The fair value of the promissory note as of December 31, 2022 was $421,900.
On July 7, 2022, the Company issued an unsecured promissory note to the Sponsor for up to an aggregate principal amount of $2,060,070 to be deposited into the Trust Account in connection with the Extension. The Company was to deposit up to six equal installments of the Extension Funds, or $343,345, into the Trust Account on a monthly basis for each month of the Extension and such amount will be distributed either to: (i) all of the holders of the Public Shares upon the Company’s liquidation or (ii) holders of Public Shares who elect to have their shares redeemed in connection with the consummation of the Company’s initial Business Combination. The Extension Funds note is not convertible and bears no interest and is due and payable upon the earlier of the date on which the Company consummates its initial Business Combination or the date of the liquidation of the Company. As of December 31, 2022, an aggregate of $1,373,380 has been drawn down on the Extension Funds and deposited into the Trust Account to cover the first four months of the extension.
On November 23, 2022, the Company issued a promissory note (the “Near Extension Note”), dated as of November 18, 2022, in the aggregate principal amount of up to $686,690, to Near. The Near Extension Note relates to the final two payments of the Company’s extension funds of $343,345 each to be deposited into the Trust Account for each month in which the date by which the Company must consummate its initial business combination is extended, from July 11, 2022 until January 11, 2023. As of December 31, 2022, the full amount of $686,690 has been drawn down on the Near Extension Note and deposited into the Trust Account.
Critical Accounting Policies
The preparation of consolidated financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates.
Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480 and meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own shares of common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. For the private placement warrants, the fair value was estimated using a binomial lattice model incorporating the Cox-Rss-Rubenstein methodology at the closing date of the initial public offering and as of December 31, 2021. For the public warrants, the fair value was estimated using a binomial lattice model incorporating the Cox-Rss-Rubenstein methodology at the closing date of the initial public offering and the level 1 quoted prices in an active market as of December 31, 2022.
Class A Common Stock Subject to Possible Redemption
We account for our common stock subject to possible conversion in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption is classified as a liability instrument and measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our Class A common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, all shares of Class A common stock subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders’ equity section of our balance sheets.
Net Loss Per Share of Common Stock
Net loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period. The Company applies the two-class method in calculating loss per share of common stock. Re-measurement associated with the redeemable shares of Class A common stock is excluded from loss per common share as the redemption value approximates fair value. Net income or loss is allocated among the classes of ordinary shares based on weighted average shares outstanding.
The calculation of diluted loss per share of common stock does not consider the effect of the warrants issued in connection with the (i) initial public offering, and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants are exercisable to purchase 13,825,000 shares of Class A common stock in the aggregate. As of December 31, 2022 and 2021, the Company did not have any other dilutive securities or other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted net loss per common share is the same as basic net loss per common share for the periods presented.
Convertible Instruments
The Company evaluated the accounting for its promissory notes that feature conversion options in accordance with ASC Topic 815, Derivatives and Hedging Activities (“ASC 815”). ASC 815 requires companies to bifurcate conversion options from their host instruments and account for them as freestanding derivative financial instruments according to certain criteria. The criteria includes circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) a promissory note that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. However, the Company has elected to account for its Working Capital Loan at fair value, as described in Note 10 to the accompanying consolidated financial statements.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our consolidated financial statements.
Factors That May Adversely Affect our Results of Operations
Our results of operations and our ability to complete an initial business combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the ongoing effects of the COVID-19 pandemic, including resurgences and the emergence of new variants, and geopolitical instability, such as the military conflict in Ukraine. We cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and our ability to complete an initial business combination.
