| ☒ | 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, 2021JUNE 30, 2023
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).
2022 $ 30,294 $ 212,608 3,000 1,500 43,629 61,530 76,923 275,638 32,565 — 48,590,022 313,913,217 $ 5,803,741 $ 5,440,933 300,000 — 6,103,741 5,440,933 776,017 164,410 10,830,775 10,830,775 48,622,587 313,913,217 — — — —
June 30, 2023 and December 31, 2022 774 774 — — (17,634,384 ) (16,161,254 ) thethese unaudited condensed consolidated financial statements.
THREE MONTHS ENDED MARCH 31, 2021
(UNAUDITED)
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 | ) | |
|
|
|
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Operating and formation costs | $ | 547,114 | $ | 243,574 | $ | 861,523 | $ | 1,946,336 | ||||||||
Loss from operations | (547,114 | ) | (243,574 | ) | (861,523 | ) | (1,946,336 | ) | ||||||||
| Other income (expenses): | ||||||||||||||||
Change in fair value of warrant liabilities | (228,531 | ) | 2,594,396 | (611,607 | ) | 7,097,595 | ||||||||||
Interest earned on cash and investments held in the Trust Account | 519,310 | 417,862 | 3,294,864 | 448,071 | ||||||||||||
Other income, net | 290,779 | 3,012,258 | 2,683,257 | 7,545,666 | ||||||||||||
| Net income (loss) | $ | (256,335 | ) | $ | 2,768,684 | $ | 1,821,734 | $ | 5,599,330 | |||||||
Weighted average shares outstanding of Class A ordinary shares | 4,646,574 | 30,945,072 | 15,458,179 | 30,945,072 | ||||||||||||
| Basic and diluted net income (loss) per share, Class A ordinary shares | $ | (0.02 | ) | $ | 0.07 | $ | 0.08 | $ | 0.14 | |||||||
Weighted average shares outstanding of Class B ordinary shares | 7,736,268 | 7,736,268 | 7,736,268 | 7,736,268 | ||||||||||||
| Basic and diluted net income (loss) per share, Class B ordinary shares | $ | (0.02 | ) | $ | 0.07 | $ | 0.08 | $ | 0.14 | |||||||
DEFICIT
(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 | ) | |||||||||||||||||||
|
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| |||||||||||||||
Balance – March 31, 2021 | 3,038,662 | $ | 304 | 8,625,000 | $ | 863 | $ | 6,407,837 | $ | (1,408,996 | ) | $ | 5,000,008 | |||||||||||||||
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|
JUNE 30, 2023
Class B Ordinary Shares | Additional Paid-in Capital | Accumulated Deficit | Total Shareholders’ Deficit | |||||||||||||||||
Shares | Amount | |||||||||||||||||||
Balance — January 1, 2023 | 7,736,268 | $ | 774 | $ | — | $ | (16,161,254 | ) | $ | (16,160,480 | ) | |||||||||
Shareholder non redemption agreement | — | — | (744,274 | ) | — | (744,274 | ) | |||||||||||||
Contribution by Sponsor | — | — | 744,274 | — | 744,274 | |||||||||||||||
Accretion for Class A ordinary shares to redemption amount | — | — | — | (2,775,554 | ) | (2,775,554 | ) | |||||||||||||
Net income | — | — | — | 2,078,069 | 2,078,069 | |||||||||||||||
Balance — March 31, 2023 (unaudited) | 7,736,268 | 774 | — | (16,858,739 | ) | (16,857,965 | ) | |||||||||||||
Accretion for Class A ordinary shares to redemption amount | — | — | — | (519,310 | ) | (519,310 | ) | |||||||||||||
Net loss | — | — | — | (256,335 | ) | (256,335 | ) | |||||||||||||
Balance — June 30, 2023 (unaudited) | 7,736,268 | $ | 774 | $ | — | $ | (17,634,384 | ) | $ | (17,633,610 | ) | |||||||||
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 | ) | |||||||||||||
Accretion 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 | ) | |||||||||
THREE MONTHS ENDED MARCH 31, 2021
(UNAUDITED)
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 | ) | |
|
|
For the Six Months Ended June 30, | ||||||||
2023 | 2022 | |||||||
Cash Flows from Operating Activities: | ||||||||
| Net income | $ | 1,821,734 | $ | 5,599,330 | ||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Interest earned on cash and investments held in Trust Account | (3,294,864 | ) | (448,071 | ) | ||||
| Change in fair value of warrant liabilities | 611,607 | (7,097,595 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Due from Sponsor | (1,500 | ) | (1,500 | ) | ||||
| Prepaid expenses | 17,901 | 119,464 | ||||||
| Accounts payable and accrued expenses | 362,808 | 1,372,543 | ||||||
Net cash used in operating activities | (482,314 | ) | (455,829 | ) | ||||
Cash Flows from Investing Activities: | ||||||||
| Cash withdrawn from Trust Account in connection with redemption | 268,585,494 | — | ||||||
Net cash provided by investing activities | 268,585,494 | — | ||||||
Cash Flows from Financing Activities: | ||||||||
| Related party advance | 300,000 | — | ||||||
| Redemption of ordinary shares | (268,585,494 | ) | — | |||||
Net cash used in financing activities | (268,285,494 | ) | — | |||||
Net Change in Cash | (182,314 | ) | (455,829 | ) | ||||
| Cash – Beginning of the period | 212,608 | 861,474 | ||||||
| �� | ||||||||
Cash – End of the period | $ | 30,294 | $ | 405,645 | ||||
MARCH 31, 2021
(Unaudited)
The Company has one wholly owned subsidiary that were created on
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 will have until March 4, 2023 to complete a Business Combination (the “Combination Period”). Period.
NOTE 2 — REVISION OF PREVIOUSLY ISSUED FINANCIAL STATEMENT
The
DHC ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
On April 12, 2021, the Acting Director of the Division of Corporation Financeclosing its digital banking platform and Acting Chief Accountant of the Securities and Exchange Commission together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). Specifically, the SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement.
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 classified as a component of equity only if, among other things, the warrant is indexed to the issuer’s ordinary shares. Under ASC Section 815-40-15, a warrant is not indexed to the issuer’s ordinary shares if the terms of the warrant require an adjustment to the exercise price upon a specified event and that event is not an input to the fair value of the warrant. Based on management’s evaluation, the Company’s audit committee, in consultation with management, concluded that the Company’s Private Placement Warrants are not indexed to the Company’s ordinary shares in the manner contemplated by ASC Section 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares. In addition, based on management’s evaluation, the Company’s audit committee, in consultation with management, concluded that the tender offer provision fails the “classified in shareholders’ equity” criteria as contemplated by ASC Section 815-40-25.
In accordance with ASC 825-10, as a result of the classification of the warrants as derivative liabilities, 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.
products. As a result of the above,termination of the Business Combination Agreement, each of the Ancillary Agreements (as defined in the Business Combination Agreement) were terminated.
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)
2022.
the Trust Account were comprised of $313,913,217 invested primarily in U.S. Treasury Securities. 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, provide the Company working capital loans, as defined below.
| 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 | 4,462,497 | |||
Class A ordinary shares subject to possible redemption as of December 31, 2022 | 313,913,217 | |||
| Less: | ||||
| Redemption | (268,585,494 | ) | ||
| Plus: | ||||
| Accretion of carrying value to redemption value | 3,294,864 | |||
Class A ordinary shares subject to possible redemption as of June 30, 2023 (unaudited) | $ | 48,622,587 | ||
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 income (loss) per share. Net incomeresult, diluted net Income (Loss) 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
For the Three Months Ended June 30, | ||||||||||||||||
2023 | 2022 | |||||||||||||||
Class A | Class B | Class A | Class B | |||||||||||||
Basic and diluted net Income (Loss) per ordinary share | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net Income (Loss), as adjusted | $ | (96,188 | ) | $ | (160,147 | ) | $ | 2,214,947 | $ | 553,737 | ||||||
| Denominator: | ||||||||||||||||
| Basic and diluted weighted average shares outstanding | 4,646,574 | 7,736,268 | 30,945,072 | 7,736,268 | ||||||||||||
| Basic and diluted net Income (Loss) per ordinary share | $ | (0.02 | ) | $ | (0.02 | ) | $ | 0.07 | $ | 0.07 | ||||||
For the Six Months Ended June 30, | ||||||||||||||||
2023 | 2022 | |||||||||||||||
Class A | Class B | Class A | Class B | |||||||||||||
Basic and diluted net income per ordinary share | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net income, as adjusted | $ | 1,214,113 | $ | 607,621 | $ | 4,479,464 | $ | 1,119,866 | ||||||||
| Denominator: | ||||||||||||||||
| Basic and diluted weighted average shares outstanding | 15,458,179 | 7,736,268 | 30,945,072 | 7,736,268 | ||||||||||||
| Basic and diluted net income per ordinary share | $ | 0.08 | $ | 0.08 | $ | 0.14 | $ | 0.14 | ||||||||
MARCH 31, 2021
(Unaudited)
The Company has not adopted this guidance as of June 30, 2023.
forfeited on March 4, 2021.
DHC ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
sheets, respectively.
Borrowings under the Promissory Note are no longer available.
Sponsor entered into
February 28, 2023 | ||||
| Risk-free interest rate | 4.72 | % | ||
| Remaining life of SPAC | 0.68 | |||
Value in no De-SPAC scenario | $ | 0.00 | ||
| Probability of transaction | 50.00 | % | ||
AND CONTINGENCIES
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 one-for-one basis, subject to adjustment. In the case that additional Class A ordinary shares, or equity-linked securities, are issued or deemed issued in excess of the amounts sold in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which Class B ordinary shares shall convert into Class A ordinary shares will be adjusted (unless the holders of a majority of the issued and outstanding Class B ordinary shares agree to waive such anti-dilution adjustment with respect to any such issuance or deemed issuance) so that the number of Class A ordinary shares issuable upon conversion of all Class B ordinary shares will equal, in the aggregate, 20% of the sum of all ordinary shares issued and outstanding upon completion of the Initial Public Offering plus all Class A ordinary shares and equity-linked securities issued or deemed issued in connection with the Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the Business Combination and any private placement-equivalent warrants issued to the Sponsor or its affiliates upon conversion of loans made to the Company).
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 | $ | — | |||||||
June 30, 2023 | December 31, 2022 | |||||||||||||||
Level | Amount | Level | Amount | |||||||||||||
| Assets: | ||||||||||||||||
| Cash and investments held in Trust Account | 1 | $ | 48,590,022 | 1 | $ | 313,913,217 | ||||||||||
| Liabilities: | ||||||||||||||||
| Warrant Liabilities – Public Warrants | 2 | $ | 486,869 | 2 | $ | 103,150 | ||||||||||
| Warrant Liabilities – Private Placement Warrants | 2 | $ | 289,148 | 2 | $ | 61,260 | ||||||||||
MARCH 31, 2021
(Unaudited)
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 June 30, 2023 and Private PlacementDecember 31, 2022, the Public Warrants werehave detached from the Units, and the closing price is utilized as followsthe fair value.
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 March 31, 2021, the aggregate valuesend of the Private Placement Warrants and Public Warrants were determinedreporting period in which a change in valuation technique or methodology occurs. Due to be $1.03 per warrant for aggregate valuesthe lack of $6.31 million and $10.62 million, respectively.
The following table presentsan active market, the changes in theestimated fair value of the Public Warrants transferred from a Level 3 warrant liabilities:
| 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 | |||||||||
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Fair value as of March 31, 2021 | $ | 6,309,790 | $ | 10,624,475 | $ | 16,934,265 | ||||||
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DHC ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH1 measurement to a Level 2 fair value measurement during year ended December 31, 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, and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Quarterly Report. 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.statements. 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 Combinationbusiness combination using cash derived from the proceeds of the Initial Public Offeringinitial public offering and the sale of the Private Placement Warrants,private placement warrants, our shares, debt or a combination of cash, shares and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete On July 25, 2022, we entered into a Business Combination will be successful.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”). On January 26, 2023, we sent GloriFi written notice that we had terminated the Business Combination Agreement, pursuant to Section 9.01(i) and Section 9.01(f) the Business Combination Agreement. Our decision to terminate the Business Combination Agreement took into account the fact that GloriFi had previously publicly announced that GloriFi was winding down its operations and closing its digital banking platform and other products.
On March 3, 2023, we held an extraordinary general meeting (the “Extension Meeting”) to vote on a number of proposals, including a proposal to approve an amendment to our amended and restated memorandum and articles of association to (i) extend the date by which we have to consummate a business combination from March 4, 2023 to December 4, 2023 (the “Combination Period”). The proposal was approved by our shareholders. In connection with the Extension Meeting, the holders of 26,298,498 Class A ordinary shares of the Company (the “Redeeming Shareholders”) properly exercised their right to redeem their Class A ordinary shares for cash at a redemption price of approximately $10.21 per share, for an aggregate redemption amount of approximately $269,585,000. This could adversely impact our ability to consummate a business combination within the Combination Period.
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Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities through March 31, 2021June 30, 2023 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and identifying a target company for a 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,June 30, 2023, we had a net loss of $1,393,996,$256,335, which consists of the operating and formation costs of $150,016,$547,114 and change in fair value of warrant liabilityliabilities of $657,641 and transaction costs allocated to$228,531, offset by interest earned on cash held in the Trust Account of $519,310.
For the three months ended June 30, 2022, we had a net income of $2,768,684, which consists of the change in fair value of warrant liabilities of $586,339.$2,594,396 and interest earned on cash and investments held in the Trust Account of $417,862, offset by operating and formation costs of $243,574.
For the six months ended June 30, 2023, we had a net income of $1,821,734, which consists of interest earned on cash and investments held in the Trust Account of $3,294,864, offset by the operating and formation costs of $861,523 and change in fair value of warrant liabilities of $611,607.
For the six months ended June 30, 2022, we had a net income of $5,599,330, which consists of the change in fair value of warrant liabilities of $7,097,595 and interest earned on cash and investments held in the Trust Account of $448,071, offset by operating and formation costs of $1,946,336.
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 threesix months ended March 31, 2021,June 30, 2023, cash used in operating activities was $954,856.$482,314. Net lossincome of $1,403,996$1,821,734 was affected by change in fair value of warrant liability of $657,641 and transaction costs allocated to warrant liabilities of $586,339.$611,607 and interest earned on cash held in the Trust Account of $3,294,864. Changes in operating assets and liabilities provided $379,209 of cash for operating activities.
For the six months ended June 30, 2022, cash used $804,840in operating activities was $455,829. Net income of $5,599,330 was affected by change in fair value of warrant liabilities of $7,097,595 and interest earned on cash held in the Trust Account of $448,071. Changes in operating assets and liabilities provided $1,490,507 of cash for operating activities.
As of March 31, 2021,June 30, 2023, we had cash held in the Trust Account of $309,450,720.$48,590,022. 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.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,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. On March 3, 2023, we held the Extension Meeting to, in part, amend our amended and restated memorandum and articles of association to extend the date by which we have to consummate a business combination. In connection with that vote, the Redeeming Shareholders properly exercised their right to redeem their shares for an aggregate redemption amount of approximately $268,585,000. In connection with the extension, the trustee of the Trust Account placed the funds remaining in the Trust Account in an interest bearing cash bank account. The Trust Account does not hold any investments.
In connection with the Extension Meeting, as described in Note 1, due to a clerical error by the trustee of the Trust Account, the Redeeming Shareholders were overpaid approximately $0.03 per Class A ordinary share that was redeemed, for an aggregate total overpayment amount of $887,555 (the “Overpayment Amount”). As of June 30, 2023, the Company has collected $854,990 of the overpayment and $32,565 remains receivable. The Company is in process of collecting the remaining Overpayment Amount and currently expects to fully recover the total Overpayment Amount.
21
As of March 31, 2021,June 30, 2023, we had cash of $1,573,788.$30,294. 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.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 December 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 December 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 consolidated 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.June 30, 2023. 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 unaudited 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 statementunaudited condensed 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.
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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 Income (Loss) Per Ordinary Share
Net income (loss) 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 June 30, 2023.
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 unaudited 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.June 30, 2023. 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,due to its review and thatapproval procedures for the foregoing arose as a result of a material weakness inquarterly financial statements.
Management intends to enhance our review and approval procedures for the Company’s internal control over financial reporting. In light of this material weakness, we performed additional analysis as deemed necessary to ensure that ourquarterly financial statements, were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believesincluding through enhanced analyses by our personnel and third-party professionals. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the 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.intended effects.
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 June 30, 2023 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.
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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, 2022, which was filed with the SEC.SEC on March 30, 2023 (our “Annual Report”). 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 and other reports we are unablefile with, or furnish to, develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
On April 12, 2021, the staff of the SEC issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “Statement”). 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 and will be recorded at fair value withSEC. There have been no material changes in fair value each period reported in earnings, which may have an adverse effect on the market price of our Class A ordinary shares or may make it more 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 reportingrisk factors since 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 costly 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 ability 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 reporting 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.filings.
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, could have a material adverse effect on our business, results of operations and financial condition or our ability to complete an initial business combination.
Our warrants are accounted for as a warrant liability 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 of our Class A ordinary shares or may make it more difficult for us to consummate an initial business combination.
In connection with our initial public offering and the concurrent private placement of warrants, we issued an aggregate of 16,441,034 warrants (including 10,315,024 warrants included 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 a 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 us to consummate an initial business combination with a target business.
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
NoneNone.
Item 4. Mine Safety Disclosures
NoneNone.
NoneNone.
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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. |
|
SIGNATURES
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) | ||||||||
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