☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
76092
Title of each class | Trading Symbol(s) |
| ||
Units, each consisting of one share of Class A ordinary shares, $0.0001 par value, and one-third of one redeemable warrant | DHCAU | The Nasdaq Stock Market LLC | ||
Class A ordinary shares included as part of the units | DHCA | The Nasdaq Stock Market LLC | ||
Redeemable warrants included as part of the units, each whole warrant exercisable for one Class A ordinary share at an exercise price of $11.50 | DHCAW | The Nasdaq Stock Market LLC |
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
Emerging growth company | ☒ |
DHC ACQUISITION CORP.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2021SEPTEMBER 30, 2022
ASSETS Current assets Cash Prepaid expenses Total Current Assets Deferred offering costs Cash held in Trust Account TOTAL ASSETS LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Accrued Expenses Accrued offering expenses Promissory note – related party Total Current Liabilities Warrant Liabilities Deferred underwriting fee payable Total Liabilities Commitments and Contingencies Class A ordinary shares subject to possible redemption; 27,906,410 and no shares at a redemption value of $10.00 per share at March 31, 2021 and December 31, 2020, respectively Shareholders’ Equity Preference shares, $0.0001 par value; 5,000,000 shares authorized; none issued and outstanding Class A ordinary shares, $0.0001 par value; 500,000,000 shares authorized; 3,038,662 and no shares issued and outstanding (excluding 27,906,410 and no shares subject to possible redemption) at March 31, 2021 and December 31, 2020, respectively Class B ordinary shares, $0.0001 par value; 50,000,000 shares authorized; 8,625,000 shares issued and outstanding at March 31, 2021 and December 31, 2020 (1) Additional paid-in capital Accumulated deficit Total Shareholders’ Equity TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY March 31,
2021 December 31,
2020 (Unaudited) $ 1,573,788 — 872,378 — 2,446,166 — — 71,546 309,450,720 — $ 311,896,886 $ 71,546 $ 50,738 $ — 17,000 37,905 — 13,641 67,738 51,546 16,934,265 — 10,830,775 — 27,832,778 51,546 279,064,100 — — — 304 — 863 863 6,407,837 24,137 (1,408,996 ) (5,000 ) 5,000,008 20,000 $ 311,896,886 $ 71,546 (1)At December 31, 2020, included up to 1,125,000 shares subject to forfeiture if the over-allotment option was not exercised in full or in part by the underwriters. On March 1, 2021, the Company effected a share capitalization, pursuant to which an additional 1,437,500 Class B ordinary shares were issued, resulting in an aggregate of 8,625,000 Founder Shares outstanding. At March 31, 2021, the Founder Shares include an aggregate of up to 888,732 shares that were subject to forfeiture by the Sponsor following the underwriters’ election to partially exercise their over-allotment option. All share and associated amounts have been retroactively restated to reflect the share forfeiture (see Note 6). $ 349,447 $ 861,474 1,500 — 686,130 388,666 1,037,077 1,250,140 311,295,520 309,450,720 $ 5,378,136 $ 1,024,627 5,378,136 1,024,627 1,644,103 8,299,434 10,830,775 10,830,775 311,295,520 309,450,720 — — — — 774 774 — — (16,816,711 ) (18,905,470 )
THREE MONTHS ENDED MARCH 31, 2021
Operating and formation costs | $ | 160,016 | ||
|
| |||
Loss from operations | (160,016 | ) | ||
Other expense: | ||||
Change in fair value of warrant liabilities | (657,641 | ) | ||
Transaction costs allocated to warrant liabilities | (586,339 | ) | ||
|
| |||
Other expense | (1,243,980 | ) | ||
|
| |||
Net loss | $ | (1,403,996 | ) | |
|
| |||
Weighted average shares outstanding, Class A redeemable ordinary shares | 30,945,072 | |||
|
| |||
Basic and diluted net income per share, Class A redeemable ordinary shares | $ | (0.00 | ) | |
|
| |||
Weighted average shares outstanding, Class B non-redeemable ordinary shares (1) | 7,570,880 | |||
|
| |||
Basic and diluted net loss per share, Class B non-redeemable ordinary shares | $ | (0.19 | ) | |
|
|
|
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Operating and formation costs | $ | 2,620,236 | $ | 549,272 | $ | 4,566,572 | $ | 1,461,885 | ||||||||
Loss from operations | (2,620,236 | ) | (549,272 | ) | (4,566,572 | ) | (1,461,885 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Change in fair value of warrant liabilities | (442,264 | ) | 5,322,390 | 6,655,331 | 4,767,900 | |||||||||||
Transaction costs allocable to warrant liabilities | — | — | — | (586,339 | ) | |||||||||||
Interest earned on investments held in the Trust Account | 1,396,729 | — | 1,844,800 | — | ||||||||||||
Other income (expense), net | 954,465 | 5,322,390 | 8,500,131 | 4,181,561 | ||||||||||||
Net (loss) income | $ | (1,665,771 | ) | $ | 4,773,118 | $ | 3,933,559 | $ | 2,719,676 | |||||||
Weighted average shares outstanding of Class A ordinary shares | 30,945,072 | 30,945,072 | 30,945,072 | 23,913,792 | ||||||||||||
Basic and diluted net (loss) income per share, Class A ordinary shares | $ | (0.04 | ) | $ | 0.12 | $ | 0.10 | $ | 0.09 | |||||||
Weighted average shares outstanding of Class B ordinary shares | 7,736,268 | 7,736,268 | 7,736,268 | 7,681,745 | ||||||||||||
Basic and diluted net (loss) income per share, Class B ordinary shares | $ | (0.04 | ) | $ | 0.12 | $ | 0.10 | $ | 0.09 | |||||||
DEFICIT
Class B Ordinary Shares | Additional Paid-in Capital | Accumulated Deficit | Total Shareholders’ Deficit | |||||||||||||||||
Shares | Amount | |||||||||||||||||||
Balance — January 1, 2022 | 7,736,268 | $ | 774 | $ | — | $ | (18,905,470 | ) | $ | (18,904,696 | ) | |||||||||
Net income | — | — | — | 2,830,646 | 2,830,646 | |||||||||||||||
Balance — March 31, 2022 (unaudited) | 7,736,268 | 774 | — | (16,074,824 | ) | (16,074,050 | ) | |||||||||||||
Accr e tion for Class A ordinary shares to redemption amount | — | — | — | (448,071 | ) | (448,071 | ) | |||||||||||||
Net income | — | — | — | 2,768,684 | 2,768,684 | |||||||||||||||
Balance — June 30, 2022 (unaudited) | 7,736,268 | 774 | — | (13,754,211 | ) | (13,753,437 | ) | |||||||||||||
Accretion for Class A ordinary shares to redemption amount | — | — | — | (1,396,729 | ) | (1,396,729 | ) | |||||||||||||
Net loss | — | — | — | (1,665,771 | ) | (1,665,771 | ) | |||||||||||||
Balance — September 30, 2022 (unaudited) | 7,736,268 | $ | 774 | $ | — | $ | (16,816,711 | ) | $ | (16,815,937 | ) | |||||||||
(UNAUDITED)
Class A Ordinary Shares | Class B (1) Ordinary Shares | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
Balance — January 1, 2021 | — | $ | — | 8,625,000 | $ | 863 | $ | 24,137 | $ | (5,000 | ) | $ | 20,000 | |||||||||||||||
Sale of 30,945,072 Units, net of underwriting discounts, fair value of Public Warrants and offering costs | 30,945,072 | 3,095 | — | — | 282,311,487 | — | 282,314,582 | |||||||||||||||||||||
Cash Paid in excess of fair value for private warrants | — | — | — | — | 3,133,522 | — | 3,133,522 | |||||||||||||||||||||
Ordinary shares subject to possible redemption | | (27,906,410 | ) | (2,791 | ) | — | — | | (279,061,309 | ) | — | | (279,064,100 | ) | ||||||||||||||
Net loss | — | — | — | — | — | (1,403,996 | ) | (1,403,996 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance – March 31, 2021 | 3,038,662 | $ | 304 | 8,625,000 | $ | 863 | $ | 6,407,837 | $ | (1,408,996 | ) | $ | 5,000,008 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class B Ordinary Shares | Additional Paid-in Capital | Accumulated Deficit | Total Shareholders’ Equity (Deficit) | |||||||||||||||||
Shares | Amount | |||||||||||||||||||
Balance — January 1, 2021 | 8,625,000 | $ | 863 | $ | 24,137 | $ | (5,000 | ) | $ | 20,000 | ||||||||||
Cash paid in excess of fair value for private warrants | — | — | 3,133,522 | — | 3,133,522 | |||||||||||||||
Forfeiture of Founder Shares | (888,732 | ) | (89 | ) | 89 | — | — | |||||||||||||
Accretion for Class A ordinary shares to redemption amount | — | — | (3,157,748 | ) | (23,978,390 | ) | (27,136,138 | ) | ||||||||||||
Net loss | — | — | — | (1,403,996 | ) | (1,403,996 | ) | |||||||||||||
Balance — March 31, 2021 (unaudited) | 7,736,268 | 774 | — | (25,387,386 | ) | (25,386,612 | ) | |||||||||||||
Net loss | — | — | — | (649,446 | ) | (649,446 | ) | |||||||||||||
Balance — June 30, 2021 (unaudited) | 7,736,268 | 774 | — | (26,036,832 | ) | (26,036,058 | ) | |||||||||||||
Net income | — | — | — | 4,773,118 | 4,773,118 | |||||||||||||||
Balance — September 30, 2021 (unaudited) | 7,736,268 | $ | 774 | $ | — | $ | (21,263,714 | ) | $ | (21,262,940 | ) | |||||||||
THREE MONTHS ENDED MARCH 31, 2021
Cash Flows from Operating Activities: | ||||
Net loss | $ | (1,403,996 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | ||||
Change in fair value of warrant liabilities | 657,641 | |||
Transaction costs allocated to warrant liabilities | 586,339 | |||
Changes in operating assets and liabilities: | ||||
Prepaid expenses | (845,578 | ) | ||
Accrued expenses | 50,738 | |||
|
| |||
Net cash used in operating activities | (954,856 | ) | ||
|
| |||
Cash Flows from Investing Activities: | ||||
Investment of cash in Trust Account | (309,450,720 | ) | ||
|
| |||
Net cash used in investing activities | (309,450,720 | ) | ||
|
| |||
Cash Flows from Financing Activities: | ||||
Proceeds from sale of Units, net of underwriting discounts paid | 303,261,706 | |||
Proceeds from sale of Private Placement Warrants | 9,189,015 | |||
Repayment of promissory note – related party | (171,357 | ) | ||
Payment of offering costs | (300,000 | ) | ||
|
| |||
Net cash provided by financing activities | 311,979,364 | |||
|
| |||
Net Change in Cash | 1,573,788 | |||
Cash – Beginning of period | — | |||
|
| |||
Cash – End of period | $ | 1,573,788 | ||
|
| |||
Non-Cash investing and financing activities: | ||||
Offering costs included in accrued offering costs | $ | 17,000 | ||
|
| |||
Offering costs paid through promissory note | $ | 130,916 | ||
|
| |||
Payment of prepaid expenses through promissory note | $ | 26,800 | ||
|
| |||
Initial classification of Class A ordinary shares subject to possible redemption | 271,198,440 | |||
|
| |||
Change in value of Class A ordinary shares subject to redemption | $ | 7,865,660 | ||
|
| |||
Deferred underwriting fee payable | $ | 10,830,775 | ||
|
| |||
Forfeiture of Founder Shares | $ | (89 | ) | |
|
|
Nine Months Ended September 30, | ||||||||
2022 | 2021 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income | $ | 3,933,559 | $ | 2,719,676 | ||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
Interest earned on investments held in Trust Account | (1,844,800 | ) | — | |||||
Change in fair value of warrant liabilities | (6,655,331 | ) | (4,767,900 | ) | ||||
Transaction costs allocated to warrant liabilities | — | 586,339 | ||||||
Changes in operating assets and liabilities: | ||||||||
Due from Sponsor | (1,500 | ) | — | |||||
Prepaid expenses | (297,464 | ) | (528,197 | ) | ||||
Accounts payable and accrued expenses | 4,353,509 | 334,597 | ||||||
Net cash used in operating activities | (512,027 | ) | (1,655,485 | ) | ||||
Cash Flows from Investing Activities: | ||||||||
Investment of cash in Trust Account | — | (309,450,720 | ) | |||||
Net cash used in investing activities | — | (309,450,720 | ) | |||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from sale of Units, net of underwriting discounts paid | — | 303,261,706 | ||||||
Proceeds from sale of Private Placement Warrants | — | 9,189,015 | ||||||
Advances from related party | — | 123,780 | ||||||
Repayment of promissory note – related party | — | (171,357 | ) | |||||
Payment of offering costs | — | (317,000 | ) | |||||
Net cash provided by financing activities | — | 312,086,144 | ||||||
Net Change in Cash | (512,027 | ) | 979,939 | |||||
Cash – Beginning of period | 861,474 | — | ||||||
Cash – End of period | $ | 349,447 | $ | 979,939 | ||||
Non-cash investing and financing activities: | ||||||||
Offering costs paid through promissory note | $ | — | $ | 130,916 | ||||
Payment of prepaid expenses through promissory note | $ | — | $ | 26,800 | ||||
Deferred underwriting fee payable | $ | — | $ | 10,830,775 | ||||
Forfeiture of Founder Shares | $ | — | $ | (89 | ) | |||
MARCH 31, 2021
(Unaudited)
The Company has one wholly-owned subsidiary that were created on July 22, 2022, Glory Merger Subsidiary Corp., a Delaware corporation (“Merger Sub”).
change in fair value of the warrant liabilities.
3.
4.
DHC ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
applicable law or stock exchange listing requirements, or the Company decides to obtain shareholder approval for business or other 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. If the Company seeks shareholder approval in connection with a Business Combination, the Sponsor has agreed to vote any Founder Shares (as defined in Note 4)5) and Public Shares held by it in favor of approving a Business Combination. Additionally, each public shareholder may elect to redeem their Public Shares, without voting, and if they do vote, irrespective of whether they vote for or against an Initial Business Combination.
the Company’s Initial Public Offering.
NOTE 2 — REVISION OF PREVIOUSLY ISSUED FINANCIAL STATEMENT
(i) | prior to (but no later than the day preceding) the date of the closing of the Proposed Business Combination, the Company shall migrate to and domesticate as a Delaware corporation in accordance with Section 388 of the Delaware General Corporation Law, as amended (“DGCL”) and the Companies Act (as revised) of the Cayman Islands (the “Domestication”), upon which each share of Class A ordinary shares, $0.0001 par value per share, of the Company (“Company Class A Ordinary Shares”) shall be converted into one share of Class A common stock, $0.0001 par value per share of the Company (“Company Class A Common Stock”), and each share of Class B ordinary shares, $0.0001 par value per share, of the Company (“Company Class B Ordinary Shares”) shall be converted into one share of Class B common stock, $0.0001 par value per share, of the Company (the “Founders Class B Common Stock”) and together with the Company Class A Common Stock, the “Company Common Stock”); |
(ii) | immediately prior to the closing of the Proposed Business Combination and following the Domestication, each share of Founders Class B Common Stock shall automatically convert into one share of Company Class A Common Stock; |
(iii) | at the closing of the Proposed Business Combination (the “Closing”) and following the Domestication, upon the terms and subject to the conditions of the Business Combination Agreement and in accordance with the DGCL, Merger Sub will merge with and into GloriFi, the separate corporate existence of Merger Sub shall cease and GloriFi shall continue as the surviving corporation of the merger and a wholly owned subsidiary of the Company (the “Merger”); |
(iv) | as a result of the Merger, among other things, (a) all outstanding shares of Class A Common Stock of GloriFi held by any GloriFi current stockholder will be converted into the right to receive (1) a number of shares of Company Class A Common Stock equal to (x) the exchange ratio multiplied by (y) the number of shares of Class A Common Stock of GloriFi held by any GloriFi stockholder as of immediately prior to the effective time of the Merger (the “Effective Time”) and (2) its pro rata portion of up to 40 million shares of Company Class A Common Stock (as may be increased as a result of the forfeiture following the Closing of exchanged GloriFi restricted stock and restricted stock units) upon the closing price of the Company Class A Common Stock exceeding certain price thresholds for any 20 out of 30 consecutive trading day period in the seven year period following the Closing (the “Earnout Shares”) and (b) all outstanding shares of Class B Common Stock of GloriFi held by any GloriFi stockholder will be converted into the right to receive (1) a number of shares of Company Common Stock equal to (x) the exchange ratio multiplied by (y) the number of shares of Class B Common Stock of GloriFi held by such stockholder as of immediately prior to the Effective Time and (2) its pro rata portion of the Earnout Shares, in each case of clauses (a) and (b), other than treasury shares and dissenting shares; and |
(v) | the Company will be renamed “GloriFi, Inc.” or such other name as mutually agreed by the Company and GloriFi. |
MARCH 31, 2021
(Unaudited)
On April 12, 2021,
In further consideration of the SEC Statement, the Company’s management further evaluated the Warrants under Accounting Standards Codification (“ASC”) Subtopic 815-40, Contracts in Entity’s Own Equity. ASC Section 815-40-15 addresses equity versus liability treatment and classification of equity-linked financial instruments, including warrants, and states that a warrant may be classifiedCompany will continue as a component of equity only if,going concern, which contemplates, among other things, the warrantrealization of assets and satisfaction of liabilities in the normal course of business. As of September 30, 2022, the Company had $349,447 in its operating bank account and a working capital deficit of $4,341,059.
In accordance with ASC 825-10, as a result of the classification of the warrants as derivativeassets or liabilities should the Company expensed a portion of the offering costs originally recorded as a reduction in equity. The portion of offering costs that was expensed was determined based on the relative fair value of the Public Warrants and Class A ordinary shares included in the Units.
As a result of the above, the Company should have classified the Warrants as derivative liabilities in its previously issued financial statement as ofbe required to liquidate after March 4, 2021. Under this accounting treatment, the Company is required to measure the fair value of the Warrants at the end of each reporting period as well as re-evaluate the treatment of the warrants and recognize changes in the fair value from the prior period in the Company’s operating results for the current period.
The Company’s accounting for the Warrants as components of equity instead of as derivative liabilities did not have any effect on the Company’s previously reported investments held in trust or cash.
As | ||||||||||||
Previously | As | |||||||||||
Reported | Adjustments | Revised | ||||||||||
Balance sheet as of March 4, 2021 (audited) | ||||||||||||
Warrant Liabilities | $ | — | $ | 15,840,000 | $ | 15,840,000 | ||||||
Total liabilities | 10,988,357 | 15,840,000 | 26,828,357 | |||||||||
Class A Ordinary Shares Subject to Possible Redemption | 287,038,440 | (15,840,000 | ) | 271,198,440 | ||||||||
Class A Ordinary Shares | 130 | 158 | 288 | |||||||||
Additional Paid-in Capital | 5,004,010 | 586,181 | 5,590,191 | |||||||||
Accumulated Deficit | (5,000 | ) | (586,339 | ) | (591,339 | ) |
MARCH 31, 2021
(Unaudited)
2021.
money market funds which are invested primarily in U.S. Treasury Securities. At December 31, 2021, substantially all of the assets held in the Trust Account were held in a checking account held by Continental Stock Transfer & Trust Company.
Gross proceeds | $ | 309,450,720 | ||
Less: | ||||
Proceeds allocated to Public Warrants | (10,211,874 | ) | ||
Class A ordinary shares issuance costs | (16,924,264 | ) | ||
Plus: | ||||
Accretion of carrying value to redemption value | 27,136,138 | |||
Class A ordinary shares subject to possible redemption as of December 31, 2021 | 309,450,720 | |||
Plus: | ||||
Accretion of carrying value to redemption value | 1,844,800 | |||
Class A ordinary shares subject to possible redemption as of September 30, 2022 | $ | 311,295,520 | ||
MARCH 31, 2021
(Unaudited)
The Company’s statement of operations includes a presentation of income (loss) per share forexercised or converted into ordinary shares subject to possible redemptionand then share in the earnings of the Company. As a manner similar to the two-class method of incomeresult, diluted net (loss) per share. Net income per ordinary share is the same as basic and diluted, for Class A redeemablenet income (loss) per ordinary shares is calculated by dividing the interest income earned on the Trust Account, by the weighted average number of Class A redeemable ordinary shares outstanding since original issuance. Net loss per share basic and diluted, for Class B non-redeemable ordinary shares is calculated by dividing the net loss, adjusted for income attributable to Class A redeemable ordinary shares, by the weighted average number of Class B non-redeemable ordinary shares outstanding for the period. Class B non-redeemable ordinary shares 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.
periods presented.
Three Months Ended March 31, | ||||
2021 | ||||
Redeemable Class A Ordinary Shares | ||||
Numerator: Earnings allocable to Redeemable Class A Ordinary Shares | ||||
Interest Income | $ | — | ||
|
| |||
Net Earnings | $ | — | ||
Denominator: Weighted Average Redeemable Class A Ordinary Shares | ||||
Redeemable Class A Ordinary Shares, Basic and Diluted | 30,945,072 | |||
Earnings/Basic and Diluted Redeemable Class A Ordinary Shares | $ | — | ||
Non-Redeemable Class B Ordinary Shares | ||||
Numerator: Net Loss minus Redeemable Net Earnings | ||||
Net Loss | $ | (1,393,996 | ) | |
|
| |||
Non-Redeemable Net Loss | $ | (1,393,996 | ) | |
Denominator: Weighted Average Non-Redeemable Class B Ordinary Shares | ||||
Non-Redeemable Class B Ordinary Shares, Basic and Diluted (1) | 7,570,880 | |||
Loss/Basic and Diluted Non-Redeemable Class B Ordinary Shares | $ | (0.18 | ) |
Note: As
Three Months Ended September 30, 2022 | Three Months Ended September 30, 2021 | Nine Months Ended September 30, 2022 | Nine Months Ended September 30, 2021 | |||||||||||||||||||||||||||||
Class A | Class B | Class A | Class B | Class A | Class B | Class A | Class B | |||||||||||||||||||||||||
Basic and diluted net (loss) income per ordinary share | ||||||||||||||||||||||||||||||||
Numerator: | ||||||||||||||||||||||||||||||||
Allocation of net (loss) income, as adjusted | $ | (1,332,617 | ) | $ | (333,154 | ) | $ | 3,818,494 | 954,624 | $ | 3,146,847 | $ | 786,712 | $ | 2,058,448 | $ | 661,228 | |||||||||||||||
Denominator: | ||||||||||||||||||||||||||||||||
Basic and diluted weighted average shares outstanding | 30,945,072 | 7,736,268 | 30,945,072 | 7,736,268 | 30,945,072 | 7,736,268 | 23,913,792 | 7,681,745 | ||||||||||||||||||||||||
Basic and diluted net (loss) income per ordinary share | $ | (0.04 | ) | $ | (0.04 | ) | $ | 0.12 | 0.12 | $ | 0.10 | $ | 0.10 | $ | 0.09 | $ | 0.09 |
DHC ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
The Company has not adopted this guidance as of September 30, 2022.
forfeited on April 15, 2021.
DHC ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31,In connection with the entering into the Business Combination Agreement, on July 25, 2022, the Company will enter into into a Sponsor Agreement (the “Sponsor Agreement”), by and among the Sponsor, LLC, GloriFi, the Company and the directors of Company, pursuant to which the Sponsor agreed to, among other things, vote in favor of the Business Combination Agreement and the Proposed Business Combination and not to transfer any Company securities held by the Sponsor prior to the Closing, subject to certain exceptions, in each case, subject to the terms and conditions contemplated by the Sponsor Agreement, and the term of the
(Unaudited)
by among the Company, Sponsor and the Company’s directors, which contained, among other things, the
Borrowings under the Promissory Note are no longer available.
working capital loans outstanding.
AND CONTINGENCIES
In connection with the Proposed Business Combination, the registration rights agreement will be amended and restated.
7. SHAREHOLDERS’ DEFICIT
DHC ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
Class
The Class B ordinary shares will automatically convert into Class A ordinary shares at the time of a Business Combination on a
8. WARRANT LIABILITIES
DHC ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
|
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 |
Description | Level | March 31, 2021 | December 31, 2020 | |||||||||
Liabilities: | ||||||||||||
Warrant Liability – Public Warrants | 3 | $ | 10,624,475 | $ | — | |||||||
Warrant Liability – Private Placement Warrants | 3 | $ | 6,309,790 | $ | — |
DHC ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
September 30, 2022 | December 31, 2021 | |||||||||||||||
Level | Amount | Level | Amount | |||||||||||||
Assets: | ||||||||||||||||
Investment held in Trust Account | 1 | $ | 311,295,520 | — | $ | — | ||||||||||
Liabilities: | ||||||||||||||||
Warrant Liabilities – Public Warrants | 2 | $ | 1,031,502 | 1 | $ | 5,207,024 | ||||||||||
Warrant Liabilities – Private Placement Warrants | 2 | $ | 612,601 | 2 | $ | 3,092,410 |
Initial Measurement
The key inputs into the Monte Carlo simulation model for the Private Placement Warrants and Public Warrants were as follows at initial measurement:
Input | March 4, 2021 (Initial Measurement and Over- allotment) | |||
Risk-free interest rate | 1.03 | % | ||
Expected Term (Years) | 5.0 | |||
Expected volatility | 25.0 | % | ||
Exercise price | $ | 11.50 | ||
Unit Price | $ | 9.67 |
On March 4, 2021, inclusive of over-allotment, the Private Placement Warrants and Public Warrants were determined to be $0.99 per warrant for aggregate values of $6.06 million and $10.21 million, respectively.
Subsequent Measurement
The Warrants are measured at fair value on a recurring basis. The subsequent measurementmeasurements of the Public Warrants andafter the detachment of the Public Warrants from the Units was established by the public warrant price. The subsequent measurements of the Private Placement Warrants was calculatedestablished by using a Monte Carlo Simulation which is considered a Level 3 measurement.
The key inputs into the Monte Carlo Simulation forclosing price of the Public Warrants, an observable market quote for a similar asset in an active market. For September 30, 2022 and Private Placement Warrants were as follows at March 31, 2021:
Input | ||||
Risk-free interest rate | 1.38 | % | ||
Expected Term (Years) | 5.0 | |||
Expected volatility | 25.0 | % | ||
Exercise price | $ | 11.50 | ||
Unit Price | $ | 9.65 |
As of MarchDecember 31, 2021, the aggregate values of the Private Placement Warrants and Public Warrants were determined to be $1.03 per warrant for aggregate values of $6.31 millionhave detached from the Units, and $10.62 million, respectively.
the closing price is utilized as the fair value.
Private Placement | Public | Warrant Liabilities | ||||||||||
Fair value as of January 1, 2021 | $ | — | $ | — | $ | — | ||||||
Initial measurement on March 4, 2021 (IPO) | 5,940,000 | 9,900,000 | 15,840,000 | |||||||||
Initial measurement on March 5, 2021 (Over allotment) | 124,750 | 311,874 | 436,624 | |||||||||
Change in fair value | 245,040 | 412,601 | 657,641 | |||||||||
|
|
|
|
|
| |||||||
|
|
|
|
|
| |||||||
Fair value as of March 31, 2021 | $ | 6,309,790 | $ | 10,624,475 | $ | 16,934,265 | ||||||
|
|
|
|
|
|
DHC ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31,
Private Placement | Public | Warrant Liabilities | ||||||||||
Fair value as of January 1, 2021 | $ | — | $ | — | $ | — | ||||||
Initial measurement on March 4, 2021 (IPO) | 5,940,000 | 9,900,000 | 15,840,000 | |||||||||
Initial measurement on March 5, 2021 (Over allotment) | 124,750 | 311,874 | 436,624 | |||||||||
Change in fair value | 245,040 | 412,621 | 657,641 | |||||||||
Fair value as of March 31, 2021 | 6,309,790 | 10,624,475 | 16,934,265 | |||||||||
Change in fair value | — | (103,151 | ) | (103,151 | ) | |||||||
Transfer to Level 1 | — | (10,521,324 | ) | (10,521,324 | ) | |||||||
Fair value as of June 30, 2021 | 6,309,790 | — | 6,309,790 | |||||||||
Change in fair value | (2,021,583 | ) | — | (2,021,583 | ) | |||||||
Transfer to Level 1 | (4,288,207 | ) | — | (4,288,207 | ) | |||||||
Fair value as of September 30, 2021 | $ | — | $ | — | $ | — | ||||||
(Unaudited)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to DHC Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to DHC Sponsor, LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-QQuarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the completion of the Proposed Business Combination (as defined below), the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Such statements include, but are not limited to, possible business combinations, including our Proposed Business Combination, and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-Q. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements, including that the conditions of the Proposed Business Combination are not satisfied. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its Initial Public OfferingAnnual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”).SEC. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated in the Cayman Islands on December 22, 2020 formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization, or similar business combination with one or more businesses or entities. We intend to effectuate our Business Combination using cash derived from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our shares, debt or a combination of cash, shares and debt. As described in greater detail in Note 1- Description of Organization and Business Operations to the notes to the unaudited financial statements included herein under Part I, Item 1, on July 25, 2022, we entered into a Business Combination Agreement and Plan of Reorganization (the “Business Combination Agreement”), by and among the Company, Glory Merger Subsidiary Corp., a Delaware corporation and a direct wholly owned subsidiary of the Company (“Merger Sub”) and With Purpose, Inc. (d/b/a GloriFi, Inc.) a Delaware corporation (“GloriFi”).
We expect to continue to incur significant costs in the pursuit of our acquisition plans.completing the Proposed Business Combination. We cannot assure you that our plans to complete athe Proposed Business Combination, or any Business Combination will be successful. For more information about the Business Combination Agreement and the Proposed Business Combination with GloriFi (the “Proposed Business Combination”), see Note 1 to the accompanying condensed consolidated financial statements and our Current Report on Form 8-K filed with the SEC on July 25, 2022. Notwithstanding our current pending Business Combination Agreement, in the event that such Proposed Business Combination is not consummated for any reason in the future, we may pursue an initial business combination opportunity in any business, industry, sector or geographical location.
Business Combination Agreement
As described in greater detail in Note 1- Description of Organization and Business Operations to the notes to the unaudited financial statements included herein under Part I, Item 1, on July 25, 2022, we entered into the “Business Combination Agreement. For more information about the Business Combination Agreement and the Proposed Business Combination with GloriFi (the “Proposed Business Combination”), see Note 1 to the accompanying condensed consolidated financial statements and our Current Report on Form 8-K filed with the SEC on July 25, 2022. Unless specifically stated, this Quarterly Report does not give effect to the Proposed Business Combination and does not contain the risks associated with the Proposed Business Combination. The consummation of the Proposed Business Combination is subject to certain conditions as further described in the Business Combination Agreement. Notwithstanding our current Proposed Business Combination, in the event that such Business Combination Agreement is not consummated for any reason in the future, we may pursue an initial business combination opportunity in any business, industry, sector or geographical location.
21
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities through March 31, 2021September 30, 2022 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and identifying a target company for a Business Combination, including in connection with the Proposed 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 on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended March 31, 2021,September 30, 2022, we had a net loss of $1,393,996,$1,665,771, which consists of the operating and formation costs of $150,016,$2,620,236 and change in fair value of warrant liabilityliabilities of $657,641$442,264, offset by interest earned on investments held in the Trust Account of $1,396,729.
For the nine months ended September 30, 2022, we had a net income of $3,933,559, which consists of the change in fair value of warrant liabilities of $6,655,331, and interest earned on investments held in the Trust Account of $1,844,800, offset by operating and formation costs of $4,566,572.
For the three months ended September 30, 2021, we had a net income of $4,773,118, which consists of the change in fair value of warrant liabilities of $5,322,390, offset by operating and formation costs of $549,272.
For the nine months ended September 30, 2021, we had a net income of $2,719,696, which consists of the change in fair value of warrant liabilities of $4,767,900, offset by operating and formation costs of $1,461,885 and transaction costs allocated to warrant liabilities of $586,339.
Liquidity and Capital Resources
On March 4, 2021, we consummated the Initial Public Offering of 30,000,000 Units at $10.00 per Unit, generating gross proceeds of $300,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 6,000,000 Private Placement Warrants at a price of $1.50 per Private Placement Warrant in a private placement to the Sponsor, generating gross proceeds of $9,000,000.
On March 5, 2021, in connection with the underwriters’ exerciseunderwriters of our initial public offering partially exercised their over-allotment option, in full,and we consummated the sale of an additional 945,072 Units at a price of $10.00 per Unit, generating total gross proceeds of $9,450,720. In addition, we also consummated the sale of an additional 126,010 Private Placement Warrantsprivate placement warrants at $1.50 per Private Warrant,private warrant, generating total gross proceeds of $189,015.
Following the Initial Public Offering, the partial exercise of the over-allotment option, and the sale of the Private Placement Warrants,private placement warrants, a total of $309,450,720 was placed in the Trust Account. We incurred $17,501,346 in Initial Public Offering related costs, including $6,189,014 of underwriting fees, net of reimbursement, $10,830,775 of deferred underwriting fees and $481,557 of other costs.
For the threenine months ended March 31,September 30, 2022, cash used in operating activities was $512,027. Net income of $3,933,559 was affected by change in fair value of warrant liabilities of $6,655,331 and interest earned on investments held in the Trust Account of $1,844,800. Changes in operating assets and liabilities provided $4,054,545 of cash for operating activities.
For the nine months ended September 30, 2021, cash used in operating activities was $954,856.$1,655,485. Net lossincome of $1,403,996$2,719,676 was affected by change in fair value of warrant liability of $657,641$4,767,900 and transaction costs allocated to warrant liabilities of $586,339. Changes in operating assets and liabilities used $804,840$193,600 of cash for operating activities.
As of March 31, 2021,September 30, 2022, we had cashinvestments held in the Trust Account of $309,450,720.$311,295,520. We may withdraw interest from the Trust Account to pay taxes, if any. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less income taxes payable), to complete our Business Combination. To the extent that our share capital 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.
22
As of March 31, 2021,September 30, 2022, we had cash of $1,573,788. We$349,447. If we do not complete the Proposed Business Combination, then we intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.Combination (which we currently anticipate will be the Proposed Business Combination).
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor, or certain of our officers and directors or their affiliates may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we wouldwill repay such loaned amounts. 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 such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.50 per warrant, at the option of the lender. The warrants would be identical to the Private Placement Warrants.
WeIn connection with the Company’s assessment of going concern considerations in accordance with FASB ASU2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company has until March 4, 2023, to consummate a Business Combination. It is uncertain that the Company will be able to consummate a business combination by this time. If a business combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and mandatory liquidation, should a business combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. Management plans to consummate a business combination prior to the mandatory liquidation date. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after March 4, 2023.
Based on the foregoing, management has determined that we do not believe we will need to raise additional funds in orderhave sufficient liquidity to meet our anticipated obligations for at least twelve months after the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combinationfinancial statements are less than the actual amount necessary to do so, we may have insufficient funds available to operatebe issued, as such, the events and circumstances raise substantial doubt about our business priorability to continue as a going concern, as discussed further below. The accompanying unaudited condensed financial statements have been prepared on a going concern basis and do not include any adjustments that might arise as a result of uncertainties about our Business Combination. Moreover, we may needability to obtain additional financing either to complete our Business Combination or because we become obligated to redeemcontinue as a significant number of our Public Shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination.going concern.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of March 31, 2021.September 30, 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 long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of one of our Sponsor a monthly fee of $10,000 for office space, utilities and secretarial and administrative services. We began incurring these fees on March 4, 2021 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and our liquidation.
The underwriters of our initial public offer are entitled to a deferred fee of $0.35 per unit, or $10,500,000$10,830,775 in the aggregate. The deferred fee will become payable to the underwriters of our initial public offering from the amounts held in the Trust Account solely in the event that we complete a Business Combination,business combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of condensed consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America 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 financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Warrant LiabilityLiabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued share purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815. We account for the Warrants in accordance with the guidance contained in ASC 815-40 under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the Warrants as liabilities at their fair value and adjust the Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statementcondensed consolidated statements of operations. The Private Placement Warrants and the Public Warrants for periods where no observable traded price was available are valued using a Monte Carlo simulation. For periods subsequent to the detachment of the Public Warrants from the Units, the Public Warrant quoted market price will be used as the fair value as of each relevant date.
23
Class A Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to possible conversion in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption, if any, are classified as a liability instrument and measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. Our ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ equitydeficit section of our condensed consolidated balance sheets.
Net (Loss) Income (Loss) Per Ordinary Share
Net (loss) income per ordinary share is computed by dividing net (loss) income by the weighted average number of ordinary shares outstanding during the period. We apply the two-class method in calculating earnings per share. Net income per ordinary share, basic and diluted forAccretion associated with the redeemable shares of Class A redeemable ordinary shares is calculated by dividingexcluded from earnings per share as the interest income earned on the Trust Account by the weighted average number of Class A redeemable ordinary shares outstanding since original issuance. Net loss per ordinary share, basic and diluted for Class B non-redeemable ordinary shares is calculated by dividing the net income (loss), less income attributable to Class A redeemable ordinary shares, by the weighted average number of Class B non-redeemable ordinary shares outstanding for the periods presented.
Recent Accounting StandardsPronouncements
In August 2020, the FinancialFASB issued Accounting Standards BoardUpdate (“FASB”ASU”) issued ASU 2020-06, Debt — Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. As a smaller reporting company, ASU 2020-06 is effective January 1, 2022,2024 for fiscal years beginning after December 15, 2023 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company adoptedis currently assessing the impact, if any, that ASU 2020-06 as of January 1, 2021, and the adoption did not would have an impact on its financial position, results of operations or cash flows. The Company has not adopted this guidance as of September 30, 2022.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in our reports filed or submitted under the Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms,forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our principal executive officerChief Executive Officer and principal financial officer or persons performing similar functions, as appropriateChief Financial Officer, to allow timely decisions regarding required disclosure.
UnderAs required by Rules 13a-15 and 15d-15 under the supervisionExchange Act, our Chief Executive Officer and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conductedChief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the fiscal quarter ended March 31, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.September 30, 2022. Based on thisupon their evaluation, our principal executive officerChief Executive Officer and principal financial and accounting officer haveChief Financial Officer concluded that during the period covered by this report, solely due to the Company’s restatement of its financial statements to reclassify the Company’s warrants as described in the Note 2 to the Financial Statement herein, our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective as of March 31, 2021, and that the foregoing arose as a result of a material weakness in the Company’s internal control over financial reporting. In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the periods presented.effective.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter of 2021ended September 30, 2022 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting as the circumstances that led to the restatement of the financial statements had not yet been identified. However, as management has identified a material weakness in our internal control over financial reporting with respect to the classification of the Company’s Warrants as components of equity instead of as liabilities, as well as the related determination of the fair value of warrant liabilities, additional paid-in capital and accumulated deficit, and related financial disclosures, the Company intends to address this material weakness by enhancing its processes to identify and appropriately apply applicable accounting requirements to better evaluate its research and understanding of the nuances of the complex accounting standards that apply to its financial statements. The Company’s current plans include providing enhanced access to accounting literature, research materials and documents and increased communication among its personnel and third-party professionals with whom it consults regarding complex accounting applications. The Company has also retained the services of a valuation expert to assist in valuation analysis of the Warrants on a quarterly basis.reporting.
24
Factors that could cause our actual results to differ materially from those in this report include the risk factors described in our final prospectusAnnual Report on Form 10-K for its Initial Public Offeringthe period ended December 31, 2021, which was filed with the SEC.SEC on March 11, 2022 (our “Annual Report”) and our Quarterly Reports on Form 10-Q for the periods ended March 31, 2022 (our “Q1 Quarterly Report) and June 30, 2022 (our “Q2 Quarterly Report” and together with our Q1 Quarterly Report, our “Quarterly Reports”), which were filed with the SEC on May 13, 2022 and August 15, 2022, respectively. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our final prospectus for its Initial Public OfferingAnnual Report on Form 10-K and our Q1 Quarterly Report filed with the SEC except as set forth below.
We have identified a material weaknessSEC. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. The information presented below updates, and should be read in conjunction with, the risk factors disclosed in our internal control over financial reporting as of March 31, 2021. IfAnnual Report, Q1 Quarterly Report and other reports we are unablefile with, or furnish to, developthe SEC. There have been no material changes in our risk factors since such filings, except for the following:
Changes in laws or regulations, or a failure to comply with any laws and maintain an effective system of internal control over financial reporting, weregulations, 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, including our ability to negotiate and operating results.complete our initial business combination, and results of operations.
On April 12, 2021, the staff of the SEC issued a public statement entitled “Staff Statement on AccountingWe are subject to laws and Reporting Considerations for Warrants Issuedregulations enacted by Special Purpose Acquisition Companies (“SPACs”)” (the “Statement”).national, regional and local governments. In the Statement, the SEC staff, among other things, expressed its view that certain terms and conditions common to warrants issued by special purpose acquisition companies, such as the Company, may require such warrants to be classified as liabilities on the special purpose acquisition company’s balance sheet as opposed to equity. The Company previously accounted for its outstanding warrants as components of equity instead of as derivative liabilities. See “—Our warrants are accounted for as a warrant liability andparticular, we will be recorded at fair valuerequired to comply with changes in fair value each period reported in earnings, whichcertain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may have an adverse effect on the market price of our Class A ordinary shares or may make it morebe difficult, for us to consummate an initial business combination.” In connection with this change to our accounting methodology, we identified a material weakness in our internal controls over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected and corrected on a timely basis. Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costlycostly. Those laws and there is no assurance that these initiatives will ultimately have the intended effects. If we identify any new material weaknesses in the future, any such newly identified material weakness could limit our abilityregulations and their interpretation and application may also change from time to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reportingtime and our stock price may decline as a result. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.
We may face litigation and other risks as a result of the material weakness in our internal control over financial reporting.
As a result of such material weakness, the change in accounting for the warrants, and other matters raised or that may in the future be raised by the SEC, we face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the material weaknesses in our internal control over financial reporting and the preparation of our financial statements. As of the date of this Quarterly Report, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not,those changes could have a material adverse effect on our business, investments and results of operationsoperations. In addition, a failure to comply with applicable laws or regulations, as interpreted and financial condition orapplied, could have a material adverse effect on our business, including our ability to negotiate and complete anour initial business combination.
Our warrantscombination, and results of operations. In addition, we are accounted forsubject to tax laws and regulations enacted by national, regional and local governments, those laws and regulations and their interpretation and application may also change from time to time and those changes or our failure to comply with any applicable laws or regulations, as interpreted or applied, could have a warrant liabilitymaterial adverse impact on our business, including our ability to negotiate and will be recorded at fair value with changes in fair value each period reported in earnings, which may have an adverse effect on the market price ofcomplete our Class A ordinary shares or may make it more difficult for us to consummate an initial business combination.combination, investments and results of operations.
In connection with our initial public offering andAdditionally, on March 30, 2022, the concurrent private placement of warrants, weSEC issued an aggregate of 16,441,034 warrants (including 10,315,024 warrants includedproposed rules (the “2022 Proposed Rules”) relating to, among other items, enhancing disclosures in the units and 6,126,010 private placement warrants). We account for these as a warrant liability and will record at fair value any changes in fair value each period reported in earnings as determined by us based upon a valuation report obtained from an independent third-party valuation firm. The impact of changes in fair value on earnings may have an adverse effect on the market price of our Class A ordinary shares. In addition, potential targets may seek abusiness combination transactions involving special purpose acquisition company that does not have warrants or that does not have warrants that are accounted for as a warrant liability, which may make it more difficult for uscompanies (“SPACs”) and private operating companies; amending the financial statement requirements applicable to consummate an initialtransactions involving shell companies; effectively limiting the use of projections in SEC filings in connection with proposed business combination transactions; increasing the potential liability of certain participants in proposed business combination transactions; and the extent to which SPACs could become subject to regulation under the Investment Company Act of 1940. These 2022 Proposed Rules, if adopted, whether in the form proposed or in revised form, and certain positions and legal conclusions expressed by the SEC in connection with a target business.the 2022 Proposed Rules may materially adversely affect our ability to negotiate and complete our Business Combination and may increase the costs and time related thereto.
25
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On March 4, 2021, we consummated the Initial Public Offering of 30,000,000 Units. The Units were sold at an offering price of $10.00 per unit, generating total gross proceeds of $300,000,000. Citigroup Global Markets Inc. acted as sole book-running manager and Drexel Hamilton, LLC and Roberts & Ryan Investments, Inc. acted as co-managers, of the Initial Public Offering. The securities in the offering were registered under the Securities Act on registration statement on Form S-1 (No. 333-252891)FormS-1 (No.333-252891). The Securities and Exchange CommissionSEC declared the registration statements effective on March 1, 2021.
Simultaneous with the consummation of the Initial Public Offering, the Sponsor consummated the private placement of an aggregate of 6,000,000 Warrants at a price of $1.50 per Private Placement Warrant, generating total proceeds of $9,000,000. Each whole Private Warrant is exercisable to purchase one ordinary share at an exercise price of $11.50 per share. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The Private Warrants are identical to the warrants underlying the Units sold in the Initial Public Offering, except that the Private Warrants are not transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions.
On March 5, 2021, the underwriters partially exercised their over-allotment option, resulting in the sale of an additional 945,072 Units for gross proceeds of $9,450,720, less the underwriters’ discount of $189,014. In connection with the underwriters’ exercise of their over-allotment option, the Company also consummated the sale of an additional 126,010 Private Placement Warrants at $1.50 per Private Placement Warrant, generating total proceeds of $189,015. A total of $9,450,720 was deposited into the Trust Account.
Of the gross proceeds received from the Initial Public Offering, the exercise of the over-allotment option and the Private Placement Warrants, an aggregate of $309,450,720 was placed in the Trust Account.
We paid a total of $6,189,014 in underwriting discounts and commissions and $481,557 for other costs and expenses related to the Initial Public Offering.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
None
None
26
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
32.2* | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
101.INS* | Inline XBRL Instance Document | ||
101.SCH* | Inline XBRL Taxonomy Extension Schema Document | ||
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB* | Inline XBRL Taxonomy Extension Labels Linkbase Document | ||
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||
104* | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
* | Filed herewith. |
|
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DHC ACQUISITION CORP. | ||||||
Date: | By: | /s/ Christopher Gaertner | ||||
Name: | Christopher Gaertner | |||||
Title: | Co-Chief Executive Officer | |||||
(Principal Executive Officer) | ||||||
Date: | By: | /s/ Christopher Gaertner | ||||
Name: | Christopher Gaertner | |||||
Title: | Chief Financial Officer | |||||
(Principal Financial and Accounting Officer) |
2128