Note
1—Description of Organization, Business Operations and Basis of Presentation
Colicity
Inc. (the “Company”) was incorporated in Delaware on October 19, 2020. The Company was formed for the purpose of effecting
a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more
businesses (the “Business Combination”). Although the Company is not limited to a particular industry or sector for purposes
of consummating a Business Combination, the Company intends to initially focus its search on identifying a prospective target business
in the technology, media and telecommunications (“TMT”) industries in the United States and other developed countries.
All
activity for the period from October 19, 2020 (inception) through March 31, 2021 relates to the Company’s formation, its Initial
Public Offering (as defined below), and identifying a target company for a Business Combination. The Company will not generate any
operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating income
in the form of interest income from the proceeds of the Initial Public Offering.
The
Company’s sponsor is X-icity Holdings Corporation, a Washington corporation (the “sponsor”). The registration statement
for the Initial Public Offering was declared effective on February 23, 2021. On February 26, 2021, the Company consummated the Initial
Public Offering of 34,500,000 units (the “Units” and the shares of Class A common stock included in the Units, the “Public
Shares”), including the underwriters’ exercise of their full over-allotment option of 4,500,000 units, at $10.00 per Unit,
generating gross proceeds of $345.0 million (the “Initial Public Offering”), and incurring offering costs of approximately
$18.8 million, inclusive of approximately $11.8 million in deferred underwriting commissions (Note 7).
Simultaneously
with the closing of the Initial Public Offering, the Company completed the private sale (the “Private Placement”) of an aggregate
of 5,933,333 warrants (the “Private Placement Warrants”) to the Company’s Sponsor, X-icity Holdings Corporation, at
a purchase price of $1.50 per Private Placement Warrant, generating gross proceeds to the Company of $8,900,000.
Upon
the closing of the Initial Public Offering and the Private Placement, a total of $345.0 million ($10.00 per Unit), consisting of the
net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement, was placed in a trust account
(“Trust Account”), located in the United States at J.P. Morgan Chase Bank, N.A., with Continental Stock Transfer &
Trust Company acting as trustee, and will only be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16)
of the Investment Company Act, having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated
under the Investment Company Act which invest only in direct U.S. government treasury obligations, until the earlier of (i) the
completion of a Business Combination or (ii) the distribution of the Trust Account as described below.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering
and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward
consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully.
The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the net
assets held in the Trust Account (as defined above) (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 agreement to enter into the 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
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 of 1940, as amended (the “Investment Company Act”).
The
Company will provide holders of the Company’s outstanding shares of Class A common stock, par value $0.0001 per share, sold
in the Initial Public Offering (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public
Shares (as defined below) upon the completion of a Business Combination either (i) in connection with a stockholder meeting
called to approve the Business Combination or (ii) without a stockholder vote by means of a tender offer. The decision as to whether
the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in
its discretion. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then held
in the Trust Account (initially anticipated to be $10.00 per Public Share). The per-share amount to be distributed to Public Stockholders
who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters
(as discussed in Note 6). These Public Shares are recorded at a redemption value and classified as temporary equity in accordance with
the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480
“Distinguishing Liabilities from Equity.” The Company will proceed with a Business Combination if a majority of the shares
voted are voted in favor of the Business Combination. The Company will not redeem the Public Shares in an amount that would cause its
net tangible assets to be less than $5,000,001. If a stockholder vote is not required by law and the Company does not decide to hold
a stockholder vote for business or other legal reasons, the Company will, pursuant to its Certificate of Incorporation (the “Certificate
of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”)
and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction
is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem
shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally,
each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction.
If the Company seeks stockholder approval in connection with a Business Combination, the initial stockholders (as defined below) have
agreed to vote their Founder Shares (as defined below in Note 5) and any Public Shares purchased during or after the Initial Public Offering
in favor of a Business Combination. In addition, the initial stockholders have agreed to waive their redemption rights with respect to
their Founder Shares and Public Shares in connection with the completion of a Business Combination.
The
Company’s Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any
other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), is restricted from redeeming its shares with respect to more than
an aggregate of 20% or more of the Public Shares, without the prior consent of the Company.
The
sponsor and the Company’s officers and directors (the “initial stockholders”) have agreed not to propose an amendment
to the Certificate of Incorporation to modify the substance or timing of the Company’s obligation to redeem 100% of the Public
Shares if the Company does not complete a Business Combination within the Combination Period (as defined below) or with respect to any
other material provisions relating to stockholders’ rights or pre-initial Business Combination activity, unless the Company provides
the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
If
the Company is unable to complete a Business Combination by February 26, 2023 (the “Combination Period”), the Company will
(i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business
days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the
Trust Account, including interest (less amounts released to pay taxes and up to $100,000 of interest to pay dissolution expenses), divided
by the number of then outstanding public shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders
(including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such
redemption, subject to the approval of the remaining stockholders and the Company’s board of directors, liquidate and dissolve,
subject, in each case, to its obligations under Delaware law to provide for claims of creditors and the requirements of other applicable
law. There will be no redemption rights or liquidating distributions with respect to the warrants, which will expire worthless if the
Company fails to complete a Business Combination within the 24- month time period.
The
initial stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to the Founder
Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the initial stockholders acquire
Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with
respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters
have agreed to waive their rights to the deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company
does not complete a Business Combination within in the Combination Period and, in such event, such amounts will be included with the
other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution,
it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets)
will be only $10.00. In order to protect the amounts held in the Trust Account, the sponsor has agreed to be liable to the Company if
and to the extent any claims by a third party (except for the Company’s independent registered public accounting firm) for services
rendered or products sold to the Company, or a prospective target business with which the Company has entered into a letter of intent,
confidentiality or other similar agreement or business combination agreement (a “Target”), reduce the amount of funds in
the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust
Account as of the date of the liquidation of the Trust Account, if less than $10.00 per Public Share due to reductions in the value of
the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or Target that executed
a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply
to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the “Securities Act”). The Company will seek to reduce the possibility
that the sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers
(except for the Company’s independent registered public accounting firm), prospective target businesses or other entities with
which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to
monies held in the Trust Account.
Note
2—Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying unaudited condensed financial statements are presented in U.S. dollars and have been prepared in accordance with accounting
principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance
with the instructions to Form 10-Q and Article 8 of Regulation S-X of the 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. 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 Company has selected December 31 as its fiscal year end.
The
accompanying unaudited condensed financial statements should be read in conjunction with the Company’s prospectus for its
Initial Public Offering filed with the SEC on February 25, 2021 (the “Prospectus”), as well as the Company’s
Current Report on Form 8-K filed with the SEC on March 4, 2021 (see Note 3). The financial information as of December 31, 2020 is
derived from the audited financial statements presented in the Prospectus. 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 interim
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 statements declared effective
or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with
the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected
not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application
dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time
private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with those
of another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended
transition period difficult or impossible because of the potential differences in accounting standards used.
Liquidity
and Capital Resources
As
of March 31, 2021, the Company had approximately $1.3 million in its operating bank account and working capital of approximately $1.7
million.
Prior to the completion of
the Initial Public Offering, the Company’s liquidity needs had been satisfied through the receipt of $25,000 from the sponsor in
exchange for the issuance of the Founder Shares, and a promissory note (the “Note”) issued by the sponsor (Note 6). The Company
repaid the Note on February 26, 2021. Subsequent to the consummation of the Initial Public Offering and Private Placement, the Company’s
liquidity needs have been satisfied with the proceeds from the consummation of the Private Placement not held in the Trust Account. In
addition, in order to finance transaction costs in connection with a Business Combination, the sponsor may provide the Company Working
Capital Loans (see Note 6). As of March 31, 2021 and December 31, 2020, there were no Working Capital Loans outstanding.
Based on the foregoing, management
believes that the Company has sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation
of a Business Combination or one year from the date of this financial statement. 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.
Use
of Estimates
The
preparation of financial statements in conformity with U.S. 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 revenues and expenses during the reporting period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating
its estimate, could change in the near term due to one or more future events. Accordingly, the actual results could differ significantly
from the Company’s 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.
Marketable
Securities Held in Trust Account
At
March 31, 2021, substantially all of the assets held in the Trust Account were held in U.S. Treasury Securities. As of March 31, 2021,
the Company had not withdrawn any of the interest earned on the Trust Account to pay franchise or income tax obligations. The Company
did not have any marketable securities held in a trust account at December 31, 2020.
Offering Costs Associated with the Initial Public Offering
Offering costs consist of legal, accounting, underwriting fees and other costs incurred that are directly related to the Initial Public
Offering. Offering costs amounted to $18.8 million of which $0.5 million were allocated to the warrant liabilities and expensed immediately
and $18.3 million were charged to stockholders’ equity upon the completion of the Initial Public Offering and the exercise of the
Over-Allotment Option.
Warrant
Liabilities
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, 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 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. The fair
value of the warrants was estimated using a Monte Carlo simulation approach (see Note 9).
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 Accounting Standards Codification (“ASC”) Topic
480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument
and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is either
within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s
control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s
common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence
of uncertain future events. Accordingly, at March 31, 2021, there were 30,951,059 shares of Class A common stock subject to possible
redemption presented as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheet.
The Company did not have any Class A common stock subject to possible redemption at December 31, 2020.
Income
Taxes
The
Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred
tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial
statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period
that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected
to be realized.
FASB
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statements recognition and measurement of tax
positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than
not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized
tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March
31, 2021 and December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments,
accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since
inception.
The
Company’s currently taxable income primarily consists of interest income on the Trust Account less any franchise taxes. The Company’s
general and administrative costs are generally considered start-up costs and are not currently deductible. During the three months ended
March 31, 2021, the Company recorded no income tax expense. The Company’s effective tax rate for the three months ended March 31,
2021, was 0%, which differs from the expected income tax rate due to the Company recording a full valuation allowance on its deferred
tax assets as of March 31, 2021.
Net Income (Loss) per Common Share
Net income (loss) per common
share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. The Company
has not considered the effect of warrants sold in the Initial Public Offering and the Private Placement to purchase 12,833,333 shares
of Class A common stock in the calculation of diluted income (loss) per share, since the exercise of the warrants is contingent upon
the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
The Company’s condensed
statement of operations includes a presentation of income (loss) per share for common shares subject to possible redemption in a manner
similar to the two-class method of income per share. Net income per common share, basic and diluted, for Class A common stock is
calculated by dividing the interest income earned on the Trust Account of $6,916 for the three months ended March 31, 2021 (net of applicable
franchise and income taxes of approximately $7,000 for the three months ended March 31, 2021), by the weighted average number of Class A
common stock for the period. Net loss per common share, basic and diluted, for Class B common stock is calculated by dividing the
net loss, less income attributable to Class A common stock, by the weighted average number of Class B common stock outstanding
for the period. 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.
The following table reflects the calculation of basic and diluted net
income (loss) per common share (in dollars, except per share amounts):
|
|
Three months ended March 31,
|
|
|
|
2021
|
|
Class A Common Stock
|
|
|
|
Numerator: Earnings allocable to Class A common stock
|
|
|
|
Interest income
|
|
$
|
6,916
|
|
Income and franchise tax
|
|
|
(6,916
|
)
|
Net Income
|
|
$
|
-
|
|
Denominator: Weighted average Class A common stock
|
|
|
|
|
Class A common stock, basic and diluted
|
|
|
34,500,000
|
|
Earnings per share/basic and diluted Class A common stock
|
|
$
|
0.00
|
|
Class B Common Stock
|
|
|
|
|
Numerator: Net loss less Class A common stock net income
|
|
|
|
|
Net loss
|
|
$
|
(3,270,098
|
)
|
Class A common stock net income
|
|
|
-
|
|
Net loss
|
|
$
|
(3,270,098
|
)
|
Denominator: Weighted average Class B common stock
|
|
|
|
|
Class B common stock, basic and diluted
|
|
|
8,625,000
|
|
Loss per share/basic and diluted Class B common stock
|
|
$
|
(0.38
|
)
|
Note:
for the three months ended March 31, 2021, basic and diluted shares are the same as there are no non-redeemable securities that are dilutive
to the Company’s common stockholders.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times, may exceed the Federal Deposit Insurance Corporation coverage limit of $250,000. The Company has not experienced losses
on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Financial
Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value
Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet.
Recent
Accounting Pronouncements
The
Company’s management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted
would have a material effect on the accompanying financial statement.
Note
3 — Restatement of Previously Issued Financial Statement
Background
of the Restatement
On
April 12, 2021, the staff of the Securities and Exchange Commission (the “SEC Staff”) issued a public statement entitled
“Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs”)”
(the “SEC Staff Statement”). In the SEC Staff Statement, the SEC Staff expressed its view that certain terms and conditions
common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to equity.
In the February 26,
2021 audited balance sheet, filed with the SEC on March 4, 2021 in a Current Report on Form 8-K, the Company accounted for its warrants
as equity. However, after considering the SEC Statement, review of the guidance in Accounting Standards Codification
(“ASC”) 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity” and discussions
with the Company’s independent auditors, management concluded that provisions in the warrant agreements preclude the warrants
from being accounted for as components of equity. As the warrants meet the definition of a derivative as contemplated in ASC 815,
the Company concluded that the warrants should have been recorded as derivative liabilities on the balance sheet and measured at
fair value at February 26, 2021 (inception).
Further,
ASC 815 requires that that upfront costs and fees related to items for which the fair value option is elected (the warrant liabilities)
should be recognized as expense as incurred. Accordingly, a portion of the offering costs included in equity on February 26, 2021, should
have been recorded as expense.
Effects
of the Restatement
The
following tables summarizes the effect of the restatement on specific line items in its February 26, 2021 audited closing date balance
sheet:
|
|
As Previously Reported
|
|
|
Adjustments
|
|
|
As Restated
|
|
Balance Sheet as of February 26, 2021:
|
|
|
|
|
|
|
|
|
|
Warrant liabilities
|
|
$
|
-
|
|
|
$
|
17,801,000
|
|
|
$
|
17,801,000
|
|
Total liabilities
|
|
|
11,894,317
|
|
|
|
17,801,000
|
|
|
|
29,695,317
|
|
Class A common stock subject to possible redemption
|
|
|
330,104,500
|
|
|
|
(17,801,000
|
)
|
|
|
312,303,500
|
|
Class A common stock
|
|
|
149
|
|
|
|
178
|
|
|
|
327
|
|
Additional paid-in capital
|
|
|
5,007,069
|
|
|
|
494,568
|
|
|
|
5,501,637
|
|
Accumulated deficit
|
|
|
(8,076
|
)
|
|
|
(494,746
|
)
|
|
|
(502,822
|
)
|
Note
4 — Initial Public Offering
On
February 26, 2021, the Company consummated the Initial Public Offering of 34,500,000 Units, including the underwriters’ exercise
of their full over-allotment option, at $10.00 per Unit, generating gross proceeds of $345.0 million, and incurring offering
costs of approximately $18.8 million, inclusive of approximately $11.8 million in deferred underwriting commissions.
Each
Unit consists of one share of Class A common stock, par value $0.0001 per share, and one-fifth 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).
Pendrell
Corporation, the parent of the sponsor (“Pendrell”), and an affiliate of Craig McCaw, the Company’s chief executive
officer, purchased an aggregate of 400,000 Units in the Initial Public Offering at the public offering price. The underwriters did not
receive any underwriting discounts or commissions on the Units purchased by these parties. If the Company submits its initial business
combination to its public stockholders for a vote, its initial stockholders have agreed to vote their founder shares and any public shares
purchased during or after the Initial Public Offering in favor of the initial business combination. As a result, in addition to the initial
stockholders’ founder shares and the shares underlying the Units purchased by these parties in the Initial Public Offering, the
Company would need 12,537,501, or 36.3%, of the 34,500,000 public shares sold in the Initial Public Offering to be voted in favor of
an initial business combination in order to have the initial business combination approved (assuming all outstanding shares are voted).
Note
5—Private Placement
Simultaneously with the closing
of the Initial Public Offering, the Company completed the private sale (the “Private Placement”) of an aggregate of 5,933,333
warrants (the “Private Placement Warrants”) to the Company’s Sponsor, X-icity Holdings Corporation, at a purchase price
of $1.50 per Private Placement Warrant, generating gross proceeds to the Company of $8,900,000. Each whole Private Placement Warrant is
exercisable for one whole share of Class A common stock at a price of $11.50 per share. A portion of the proceeds from the sale
of the Private Placement Warrants to the sponsor was added to the proceeds from the Initial Public Offering to be held in the Trust Account.
If the Company does not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless.
The Private Placement Warrants will be non-redeemable for cash and exercisable on a cashless basis so long as they are held by the
sponsor or its permitted transferees unless the Company calls for a redemption of all warrants when the reported price of the Class A
common stock is at least $10.00 per share and no more than $18.00 per share.
The
sponsor and the Company’s officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of
their Private Placement Warrants until 30 days after the completion of the initial Business Combination.
Note
6 — Related Party Transactions
Founder
Shares
On October 20, 2020, the sponsor
paid for certain offering costs for an aggregate price of $25,000 in exchange for issuance of 7,187,500 shares of the Company’s
Class B common stock, par value $0.0001 per share, (the “Founder Shares”). On February 3, 2021, the Company effected
a 312,500 share stock dividend, on February 8, 2021, the Company effected a 1.0541667-for-1 common stock split and on February 23, 2021,
the Company effected a 1.0909091-for-1 common stock split, resulting in an aggregate of 8,625,000 shares of Class B common stock
outstanding. Our sponsor transferred 40,250 founder shares to each of Wayne Perry, Dennis Weibling and Cathleen A. Massey, our independent
director nominees; 195,500 founder shares to Craig O. McCaw, director and Chief Executive Officer; 115,000 founder shares to Randy Russell,
Chief Investment Officer; 97,750 founder shares to R. Gerard Salemme, director; 57,500 founder shares to Steve Ednie, Chief Financial
Officer; and 329,648 founder shares to other directors, officers, employees, consultants and affiliates of Pendrell, in each case for
approximately the same per-share price initially paid by our sponsor, resulting in our sponsor holding 7,708,852 founder shares. The Founder
Shares, on an as-converted basis, represent 20.0% of the Company’s issued and outstanding shares.
The
initial stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the
earlier to occur of: (i) one year after the completion of the initial Business Combination and (ii) the date following the
completion of the initial Business Combination on which the Company completes a liquidation, merger, capital stock exchange or other
similar transaction that results in all of the Company’s stockholders having the right to exchange their common stock for cash,
securities or other property. Notwithstanding the foregoing, if the closing price of the Company’s Class A common stock equals
or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for
any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination or (2) if
the Company consummates a transaction after the initial Business Combination which results in the stockholders having the right to exchange
their shares for cash, securities or other property, the Founder Shares will be released from the lock-up.
Related
Party Loans
On
October 20, 2020, the sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public
Offering pursuant to a promissory note (the “Note”). The loan was non-interest bearing, unsecured and due at the earlier
of May 31, 2021 or the completion of the Initial Public Offering. The loan was repaid upon the closing of the Initial Public Offering
out of the $1,000,000 of offering proceeds that had been allocated to the payment of offering expenses.
In
addition, in order to finance transaction costs in connection with a Business Combination, the sponsor or an affiliate of the sponsor,
or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the
proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside
the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the
Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital
Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements
exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination 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 $1.50 per warrant. The warrants would be identical to the Private Placement Warrants. At March 31, 2021 and December
31, 2020, the Company did not have any borrowings under the Working Capital Loans.
Administrative
Services Agreement
The
Company entered into an agreement whereby, commencing on February 23, 2021 and continuing until the earlier of the Company’s consummation
of a Business Combination or the Company’s liquidation, the Company will pay an affiliate of the sponsor a total of $10,000 per
month for office space, secretarial and administrative services. For the three months ended March 31, 2021, the Company incurred $11,786
in fees for these services.
The
sponsor, executive officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred
in connection with activities on the Company’s behalf such as identifying potential target businesses and performing due diligence
on suitable Business Combinations. The Company’s audit committee will review on a quarterly basis all payments that were made to
the sponsor, officers, directors or their affiliates.
Note
7—Commitments and Contingencies
Registration
Rights
The
holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any,
(and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued
upon conversion of Working Capital Loans and upon conversion of the Founder Shares) are entitled to registration rights pursuant to a
registration rights agreement. These holders are entitled to certain demand and “piggyback” registration rights. The Company
will bear the expenses incurred in connection with the filing of any such registration statement. The registration rights agreement does
not provide for any maximum cash penalties nor any penalties connected with delays in registering the Company’s common stock.
Risks
and Uncertainties
Management
continues to evaluate the impact of the COVID-19 pandemic on the industry 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 this financial statement. The financial statement does not
include any adjustments that might results from the outcome of this uncertainty.
Underwriting
Agreement
The
underwriters received an underwriting discount of $0.20 per unit (excluding the 400,000 units purchased by Pendrell and an affiliate
of Craig McCaw as well as 517,500 shares purchased by certain other parties (total of 917,500 shares) with respect to which no underwriting
discount is payable), or $6,716,500 in the aggregate, upon the closing of the Initial Public Offering. $0.35 per unit (excluding the
400,000 units purchased by Pendrell and an affiliate of Craig McCaw as well as 517,500 shares purchased by certain other parties (total
of 917,500 shares) with respect to which no underwriting discount is payable), or $11,753,875 in the aggregate will be payable to the
underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in
the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Note
8 — Stockholders’ Equity
Class A Common
Stock — The Company is authorized to issue 200,000,000 shares of Class A common stock with a par value of $0.0001 per
share. At March 31, 2021, there were 3,548,941 shares of Class A common stock issued or outstanding, excluding 30,951,059 shares of Class
A common stock subject to possible redemption. There were no shares of Class A common stock issued or outstanding at December 31, 2020.
Class B
Common Stock — The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001
per share. In October 2020, the Company issued 7,187,500 shares of Class B common stock, on February 3, 2021, the Company effected
a 312,500 share stock dividend, on February 8, 2021, the Company effected a 1.0541667-for-1 common stock split and on February 23, 2021,
the Company effected a 1.0909091-for-1 common stock split, resulting in an aggregate of 8,625,000 shares of Class B common stock outstanding.
Stockholders
of record are entitled to one vote for each share held on all matters to be voted on by stockholders. Holders of Class A common
stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of our stockholders
except as required by law.
The
Class B common stock will automatically convert into Class A common stock at the time of the initial Business Combination on
a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject
to further adjustment as provided herein. In the case that additional shares of Class A common stock or equity-linked securities
are issued or deemed issued in connection with the initial Business Combination, the number of shares of Class A common stock issuable
upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis, 20% of the total number of shares of Class A
common stock outstanding after such conversion (after giving effect to any redemptions of shares of Class A common stock by Public
Stockholders), including the total number of shares of Class A common stock issued, or deemed issued or issuable upon conversion
or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the
consummation of the initial Business Combination, excluding any shares of Class A common stock or equity-linked securities or rights
exercisable for or convertible into shares of Class A common stock issued, or to be issued, to any seller in the initial Business
Combination and any Private Placement Warrants issued to the sponsor, officers or directors upon conversion of Working Capital Loans,
provided that such conversion of Founder Shares will never occur on a less than one-for-one basis.
Preferred
Stock — The Company is authorized to issue 1,000,000 shares of preferred stock, par value $0.0001 per share, with such
designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors.
As of March 31, 2021 and December 31, 2020, there were no shares of preferred stock issued or outstanding.
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 or (b) 12 months from the closing of the Initial Public Offering; provided in each case
that the Company has an effective registration statement under the Securities Act covering the shares of Class A common stock issuable
upon exercise of the 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 a Business Combination, the
Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the
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 and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto,
until the expiration of the Public Warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if
the Class A common stock is at the time of any exercise of a warrant 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, at its option,
require holders of Public Warrants who exercise their warrants to do so on a “cashless” basis, and, in the event the Company
so elects, the Company will not be required to file or maintain in effect a registration statement, but the Company will be required
to use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
If
(x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in
connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $9.20 per share
of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board
of directors and, in the case of any such issuance to the initial stockholders or their affiliates, without taking into account any Founder
Shares held by the initial stockholders or such affiliates, as applicable, prior to such issuance), (y) the aggregate gross proceeds
from such issuances represent more than 50% of the total equity proceeds, and interest thereon, available for the funding of the initial
Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Class A common stock during
the 10 trading day period starting on the trading day after the day on which the Company consummates the initial Business Combination
(such price, the “Market Value”) is below $9.20 per share, the exercise price of the Warrants will be adjusted (to the nearest
cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price
of the Warrants will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
The
Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the shares of Class A
common stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or saleable until 30 days
after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will
be non-redeemable so long as they are held by the sponsor or its permitted transferees, unless the Company calls for a redemption of
all warrants when the reported price of the Class A common stock is at least $10.00 per share and no more than $18.00 per share (subject
to the conditions described in more detail below). If the Private Placement Warrants are held by someone other than the sponsor or its
permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis
as the Public Warrants.
The
Company may call only the Public Warrants for redemption:
|
●
|
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, (i) the warrants are currently exercisable, (ii) there is an effective registration statement covering the Class A common
stock issuable upon exercise of the warrants and (iii) the last sales price of the Class A common stock equals or exceeds $18.00
per share on each of 20 trading days within the 30-trading day period ending on the third business day prior to the date on
which the Company sends the notice of redemption to the warrant holders.
|
If
the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the
Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.
The
Company may call both the Private Placement Warrants and the Public Warrants for redemption:
|
●
|
in whole and not in part;
|
|
●
|
at
a price of $0.10 per warrant;
|
|
●
|
upon
a minimum of 30 days’ prior written notice of redemption; and
|
|
●
|
if,
and only if, (i) there is an effective registration statement covering the Class A common stock issuable upon exercise of the warrants,
and a current prospectus relating thereto, available throughout the 30-day redemption period, and (ii) the last reported sales price
of the Class A common stock reported has been at least $10.00 per share on the trading day prior to the date on which notice of the
redemption is given.
|
During
this 30-day redemption period in connection with a redemption of warrants when the price of the Class A common stock is at least $10.00
per share and no more than $18.00 per share, the holders of the warrants may elect to receive, in lieu of the redemption price, a number
of shares of Class A common stock per warrant determined by reference to the table as set forth in the warrant agreement.
If the Company is unable
to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders
of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s
assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
Note
9 — Fair Value Measurements
At
March 31, 2021, assets held in the Trust Account were comprised of $345,006,916 in money market funds which are invested in U.S. Treasury
Securities. As of March 31, 2021, the Company had not withdrawn any of the interest earned on the Trust Account to pay franchise or income
tax obligations. There were no funds held in the Trust Account at December 31, 2021.
At
March 31, 2021, there were 6,900,000 Public Warrants and 5,933,333 Private Placement Warrants outstanding.
The
fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would
have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction
between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company
seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable
inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is
used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and
liabilities:
|
Level 1:
|
Quoted prices
in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions
for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|
|
|
|
|
Level 2:
|
Observable inputs other
than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted
prices for identical assets or liabilities in markets that are not active.
|
|
|
|
|
Level 3:
|
Unobservable inputs based
on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
The
following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring
basis at March 31, 2021 and December 31, 2020, and indicates the fair value hierarchy of the valuation inputs the Company utilized to
determine such fair value:
Description
|
|
Level
|
|
|
March 31, 2021
|
|
|
December 31, 2021
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Marketable securities held in Trust Account – U.S. Treasury Securities Money Market Fund
|
|
|
1
|
|
|
$
|
345,006,916
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liabilities
|
|
|
3
|
|
|
|
20,468,333
|
|
|
|
—
|
|
Warrants
The
warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the Balance Sheet.
The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within
change in fair value of warrant liabilities in the Statement of Operations.
The
Company established the initial fair value for the warrants on February 26, 2021, the date of the Company’s Initial Public Offering,
using a Monte Carlo simulation model. The Company allocated the proceeds received from (i) the sale of Units (which is inclusive of one
share of Class A common stock and one-fifth of one Public Warrant), (ii) the sale of Private Placement Warrants, and (iii) the issuance
of Class B common stock, first to the warrants based on their fair values as determined at initial measurement, with the remaining proceeds
allocated to Class A common stock subject to possible redemption (temporary equity), Class A common stock (permanent equity) and Class
B common stock (permanent equity) based on their relative fair values at the initial measurement date.
The
warrants were classified as Level 3 at March 31, 2021 and February 26, 2021 (inception) due to the use of unobservable inputs. There
were no transfers between Levels 1, 2 or 3 during the three months ended March 31,2021.
The
key inputs into the Monte Carlo simulation model for the warrants were as follows at March 31, 2021 and February 26, 2021:
Input
|
|
March 31,
2021
|
|
|
February 26, 2021
|
|
Risk-free interest rate
|
|
|
1.14
|
%
|
|
|
0.80
|
%
|
Expected term (years)
|
|
|
5
|
|
|
|
5
|
|
Expected volatility
|
|
|
27.00
|
%
|
|
|
25.00
|
%
|
Exercise price
|
|
$
|
11.50
|
|
|
$
|
11.50
|
|
Stock price
|
|
$
|
9.80
|
|
|
$
|
9.70
|
|
The
Company’s use of a Monte Carlo simulation model required the use of subjective assumptions:
|
●
|
The risk-free interest
rate assumption was based on the U.S. Treasury rate for expected terms, which was commensurate with the contractual term of the warrants,
which expire on the earlier of (i) five years after the completion of the initial business combination and (ii) upon redemption or
liquidation. An increase in the risk-free interest rate, in isolation, would result in an increase in the fair value measurement
of the warrant liabilities and vice versa.
|
|
●
|
The expected term was determined
based on the exercise period, the warrants become exercisable on the later of (i) 30 days after the completion of a business combination
and (ii) 12 months from the Initial Public Offering date. 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 business combinations. 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.
|
|
●
|
The
stock price at Initial Public Offering (inception) and March 31, 2021 represents the unit price less one-fifth of the warrant price at
the Initial Public Offering date. Commencing April 16, 2021, the Company’s Units were able to be separately traded as Class A common
stock and warrants.
|
Based
on the applied volatility assumption and the expected term to a business combination noted above, the Company determined that the fair
value of the warrant liabilities at February 26, 2021 (inception) was $17.8 million. As of March 31, 2021, the aggregate value of the
warrants were $20.5 million. The change in the fair value of the warrant liabilities of $2.7 million was recognized in the Statement
of Operations.
The
change in the fair value of the warrant liabilities for the period from February 26, 2021 (inception) through March 31, 2021 is summarized
as follows:
|
|
Warrant Liabilities
|
|
Fair value as of December 31, 2020
|
|
$
|
—
|
|
Initial measurement on February 26, 2021
|
|
|
17,801,000
|
|
Change in fair value of warrant liabilities
|
|
|
2,667,333
|
|
Fair value as of March 31, 2021
|
|
$
|
20,468,333
|
|
Note
10 — Subsequent Events
The
Company evaluated subsequent events and transactions that occurred after the balance sheet date through May 17, 2021, the date the
unaudited condensed financial statements were issued. Based upon this review, the Company did not identify any subsequent events
that would have required adjustment or disclosure in the unaudited condensed financial statements.