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 |
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
(Address of Principal Executive Offices) |
(Zip Code) | |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
one-half of one redeemable warrant |
exercise price of $11.50 per share | |||
share of Class A common stock, each at an |
||||
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
| ☒ | Smaller reporting company | |||||
| Emerging growth company | ||||||
Altitude Acquisition Corp.
Quarterly Report on
Form 10-Q
For the Quarter Ended September 30,
2022
2
September 30, 2022 |
December 31, 2021 |
|||||||
(Unaudited) |
||||||||
| Assets: |
||||||||
| Current Assets |
||||||||
| Cash |
$ | $ | ||||||
| Prepaid expenses |
||||||||
| |
|
|
|
|||||
| Total current assets |
||||||||
| Investments held in Trust Account |
||||||||
| |
|
|
|
|||||
| Total assets |
$ | $ | ||||||
| |
|
|
|
|||||
| Liabilities, Class A common stock subject to possible redemption and Stockholders’ Deficit: |
||||||||
| Current Liabilities |
||||||||
| Accounts payable |
$ | $ | ||||||
| Income tax es payable |
||||||||
| Advances from Sponsor |
||||||||
| Due to related party |
||||||||
| |
|
|
|
|||||
| Total current liabilities |
||||||||
| Warrant liability |
||||||||
| Deferred legal fee |
||||||||
| Deferred underwriting fee |
||||||||
| |
|
|
|
|||||
| Total liabilities |
||||||||
| |
|
|
|
|||||
| Commitments and Contingencies |
||||||||
| Class A common stock subject to possible redemption, $ |
||||||||
| Stockholders’ deficit: |
||||||||
| Preferred stock, $ |
||||||||
| Class A common stock, $ non-redeemable shares issued or outstanding at September 30, 2022 and December 31, 2021, respectively |
||||||||
| Class B common stock, $ |
||||||||
| Additional paid-in capital |
||||||||
| Accumulated deficit |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Total stockholders’ deficit |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Total liabilities, Class A common stock subject to possible redemption and stockholders’ deficit |
$ | $ | ||||||
| |
|
|
|
|||||
For the three months ended September 30, 2022 |
For the three months ended September 30, 2021 |
For the nine months ended September 30, 2022 |
For the nine months ended September 30, 2021 |
|||||||||||||
Formation and operating costs |
$ | $ | $ | $ | ||||||||||||
Loss from operations |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Other income |
||||||||||||||||
Interest income |
||||||||||||||||
Interest income earned on Trust |
||||||||||||||||
Unrealized gain on change in fair value of warrants |
||||||||||||||||
Total other income |
||||||||||||||||
Income (loss) before income tax provision |
( |
) | ||||||||||||||
Income tax provision |
( |
) | ( |
) | ||||||||||||
Net income (loss) |
$ | $ | ( |
) | $ | $ | ||||||||||
Basic and diluted weighted average shares outstanding, Class A common stock |
||||||||||||||||
Basic and diluted net income (loss) per share, Class A common stock |
$ | $ | ( |
) | $ | $ | ||||||||||
Basic and diluted weighted average shares outstanding, Class B common stock |
||||||||||||||||
Basic and diluted net income (loss) per share, Class B common stock |
$ | $ | ( |
) | $ | $ | ||||||||||
Class A Common Stock |
Class B Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Total Stockholders’ Deficit |
||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||||||||
Balance as of December 31, 2021 |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) | |||||||||||||||||||
Net income |
— | — | — | — | — | |||||||||||||||||||||||
Balance as of March 31, 2022 (unaudited) |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) | |||||||||||||||||||
Net loss |
— | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||
Accretion of Class A common stock to redemption value |
— | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||
Balance as of June 30, 2022 (unaudited) |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) | |||||||||||||||||||
Net income |
— | — | — | — | — | |||||||||||||||||||||||
Balance as of September 30, 2022 (unaudited) |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) | |||||||||||||||||||
Class A Common Stock |
Class B Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Total Stockholders’ Deficit |
||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||||||||
Balance as of December 31, 2020 |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) | |||||||||||||||||||
Net loss |
— | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||
Balance as of March 31, 2021 (unaudited) |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) | |||||||||||||||||||
Net income |
— | — | — | — | — | |||||||||||||||||||||||
Balance as of June 30, 2021 (unaudited) |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) | |||||||||||||||||||
Net loss |
— | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||
Balance as of September 30, 2021 (unaudited) |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) | |||||||||||||||||||
| For the nine months ended September 30, 2022 |
For the nine months ended September 30, 2021 |
|||||||
| Cash Flows from Operating Activities: |
||||||||
| Net income |
$ | $ | ||||||
| Adjustments to reconcile net income to net cash used in operating activities: |
||||||||
| Interest income earned on Trust |
( |
) | ( |
) | ||||
| Unrealized gain on change in fair value of warrants |
( |
) | ( |
) | ||||
| Changes in current assets and current liabilities: |
||||||||
| Prepaid expenses |
||||||||
| Due to related party |
||||||||
| Deferred legal fee |
||||||||
| Income tax es payable |
||||||||
| Advances from Sponsor |
||||||||
| Accounts payable and accrued expenses |
||||||||
| |
|
|
|
|||||
| Net cash used in operating activities |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Cash Flows from Investing Activities: |
||||||||
| Funds withdrawn from Trust Account |
||||||||
| |
|
|
|
|||||
| Net cash provided by investing activities |
||||||||
| |
|
|
|
|||||
| Net Change in Cash |
( |
) | ( |
) | ||||
| Cash-Beginning |
||||||||
| |
|
|
|
|||||
| Cash-Ending |
$ | $ | ||||||
| |
|
|
|
|||||
| Supplemental Disclosure of Non-cash Financing Activities: |
||||||||
| Payment from Trust Account in connection with redemption of shares |
$ | $ | ||||||
| |
|
|
|
|||||
For the three months ended September 30, 2022 |
For the three months ended September 30, 2021 |
|||||||||||||||
Class A |
Class B |
Class A |
Class B |
|||||||||||||
Basic and diluted net income (loss) per share: |
||||||||||||||||
Numerator: |
||||||||||||||||
Allocation of net income (loss) |
$ | $ | $ | ( |
) | $ | ( |
) | ||||||||
Denominator: |
||||||||||||||||
Weighted-average shares outstanding |
||||||||||||||||
Basic and diluted net income (loss) per share |
$ | $ | $ | ( |
) | $ | ( |
) | ||||||||
For the nine months ended September 30, 2022 |
For the nine months ended September 30, 2021 |
|||||||||||||||
Class A |
Class B |
Class A |
Class B |
|||||||||||||
Basic and diluted net income per share: |
||||||||||||||||
Numerator: |
||||||||||||||||
Allocation of net income |
$ | $ | $ | $ | ||||||||||||
Denominator: |
||||||||||||||||
Weighted-average shares outstanding |
||||||||||||||||
Basic and diluted net income per share |
$ | $ | $ | $ | ||||||||||||
| • | “Level 1”, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| • | “Level 2”, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| • | “Level 3”, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
Gross proceeds from IPO |
$ | |||
Less: |
||||
Proceeds allocated to Public Warrants |
( |
) | ||
Common stock issuance costs |
( |
) | ||
Payment from Trust Account in connection with redemption of shares Plus: |
( |
) | ||
Accretion of carrying value to redemption value |
||||
Class A common stock subject to possible redemption |
$ | |||
Gross proceeds from IPO |
$ | |||
Less: |
||||
Proceeds allocated to Public Warrants |
( |
) | ||
Common stock issuance costs |
( |
) | ||
Plus: |
||||
Accretion of carrying value to redemption value |
||||
Class A common stock subject to possible redemption |
$ | |||
| • | in whole and not in part; |
| • | at a price of $ |
| • | upon not less than (the“30-dayredemption period”) to each warrant holder; and |
| • | if, and only if, the reported last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any a period ending three business days before the Company send the notice of redemption to the warrant holders. |
September 30, 2022 |
Quoted Prices In Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Other Unobservable Inputs (Level 3) |
|||||||||||||
Assets: |
||||||||||||||||
Money Market Funds held in Trust Account |
$ | $ | $ | — | $ | — | ||||||||||
Liabilities: |
||||||||||||||||
Warrant Liability—Public Warrants |
$ | $ | $ | — | $ | — | ||||||||||
Warrant Liability—Private Placement Warrants |
$ | $ | — | $ | — | $ | ||||||||||
| $ | $ | $ | — | $ | ||||||||||||
December 31, 2021 |
Quoted Prices In Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Other Unobservable Inputs (Level 3) |
|||||||||||||
Assets: |
||||||||||||||||
Money Market Funds held in Trust Account |
$ | $ | $ | — | $ | — | ||||||||||
Liabilities: |
||||||||||||||||
Warrant Liability—Public Warrants |
$ | $ | $ | — | $ | — | ||||||||||
Warrant Liability—Private Placement Warrants |
$ | $ | — | $ | — | $ | ||||||||||
| $ | $ | $ | — | $ | ||||||||||||
Input |
September 30, 2022 |
|||
Expected term (years) |
||||
Expected volatility |
% | |||
Risk-free interest rate |
% | |||
Exercise price |
$ |
|||
Fair value of the common stock price |
$ | |||
Input |
December 31, 2021 |
|||
Expected term (years) |
||||
Expected volatility |
% | |||
Risk-free interest rate |
% | |||
Exercise price |
$ |
|||
Fair value of the common stock price |
$ | |||
Warrant Liability |
||||
| Fair value as of December 31, 2021 |
$ | |||
| Change in fair value |
( |
) | ||
| |
|
|||
| Fair value as of March 31, 2022 |
||||
| Change in fair value |
( |
) | ||
| |
|
|||
| Fair value as of June 30, 2022 |
$ | |||
| Chang e in fair value |
( |
) | ||
| |
|
|||
| Fair value as of September 30, 2022 |
$ | |||
| |
|
|||
Warrant Liability |
||||
| Fair value as of December 31, 2020 |
$ | |||
| Transfer out of Level 3 to Level 1 |
( |
) | ||
| Change in fair value |
||||
| |
|
|||
| Fair value as of March 31, 2021 |
||||
| Change in fair value |
( |
) | ||
| |
|
|||
| Fair value as of June 30, 2021 |
$ | |||
| Chang e in fair value |
( |
) | ||
| |
|
|||
| Fair value as of September 30, 2021 |
||||
| |
|
|||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to “we”, “us”, “our” or the “Company” are to Altitude Acquisition Corp., except where the context requires otherwise. The following discussion should be read in conjunction with our unaudited condensed financial statements and related notes thereto included elsewhere in this report.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.
Overview
We are a blank check company incorporated on August 12, 2020 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (a “Business Combination”). We consummated our initial public offering (“IPO”) on December 11, 2020 and are currently in the process of locating suitable targets for our Business Combination. We intend to use the cash proceeds from our IPO and the Private Placement described below as well as additional issuances, if any, of our capital stock, debt or a combination of cash, stock and debt to complete the Business Combination.
We expect to incur significant costs in the pursuit of our initial Business Combination. We cannot assure you that our plans to raise capital or to complete our initial Business Combination will be successful.
We completed the sale of 30,000,000 units (the “Units”), with each Unit comprised of one share of Class A common stock (the “Public Shares”) and one-half of one warrant (the “Public Warrants”), including the issuance of 3,900,000 Units as a result of the partial exercise of the underwriters’ over-allotment option, at $10.00 per Unit generating gross proceeds of $300,000,000. Simultaneous with the closing of the IPO, we completed the sale of 8,000,000 warrants (the “Private Warrants”) at a price of $1.00 per Private Warrant in a private placement to Altitude Acquisition Holdco, LLC (our “Sponsor”), generating gross proceeds to us of $8,000,000 (the “Private Placement”).
On June 10, 2022, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to extend the Combination Period from June 11, 2022 to October 11, 2022. In connection with the amendment to the Company’s Amended and Restated Certificate of Incorporation, stockholders holding an aggregate of 24,944,949 shares of our Class A common stock exercised their right to redeem their shares for approximately $10.01 per share of the funds held in our Trust Account (as defined below), or a total amount of $249,614,847. Following such redemptions, there were 5,055,051 public shares outstanding and an aggregate of approximately $50.6 million of cash held in the Company’s Trust Account.
In connection with the stockholder vote to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation to extend the Combination Period, on June 7, 2022 and June 10, 2022, the Company and Gary Teplis, the Company’s Chief Executive Officer, entered into non-redemption agreements (collectively, the “Non-Redemption Agreements”) with certain Company stockholders (the “Non-Redeeming Stockholders”) holding an aggregate of approximately 1.4 million shares of Class A common stock. Pursuant to the Non-Redemption Agreements, the Non-Redeeming Stockholders agreed to (a) not redeem any shares of Class A common stock held by them on the date of the Non-Redemption Agreements in connection with the vote to approve the extension to the Combination Period, (b) vote all of such shares in favor of the extension to the Combination Period and any initial business combination presented by the Company for approval by its stockholders, and (c) not Transfer (as such term is defined in the Non-Redemption Agreements) any of such shares until the earlier of the October 11, 2022 and consummation of the Company’s initial business combination (the “Termination Date”). In connection with the Non-Redemption Agreements, Mr. Teplis agreed to pay to each Non-Redeeming Stockholder $0.033 per share subject to the Non-Redemption Agreement in cash per month through the Termination Date.
On June 16, 2022, pursuant to the trust agreement dated as of December 8, 2020 between the Company and Continental Stock Transfer & Trust Company (“CST”), the trustee of the Trust Account, the Company issued a request to CST to withdraw $81,200 of interest income from the Trust Account for the payment of the Company’s taxes.
On October 5, 2022, the Company” entered into a non-redemption agreement (the “Non-Redemption Agreement”) with one of its existing stockholders (the “Non-Redeeming Stockholder”) holding an aggregate of 223,124 shares of Class A common stock, par value $0.0001, of the Company.
On October 6, 2022, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to extend the Combination Period from October 11, 2022 to April 11, 2023. In connection with the amendment to the Company’s Amended and Restated Certificate of Incorporation, stockholders holding an aggregate of 3,382,949 shares of the Company’s Class A common stock exercised their right to redeem their shares for approximately $10.05 per share of the funds held in the Company’s trust account totaling $34,009,688.
On October 11, 2022, pursuant to the trust agreement dated as of December 8, 2020 between the Company and CST, the trustee of the Trust Account, the Company issued a request to CST to withdraw $81,200 of interest income from the Trust Account for the payment of the Company’s taxes.
As of September 30, 2022, a total of $50,865,089 was held in the trust account established for the benefit of our public stockholders (the “Trust Account”). The Trust Account is invested in interest-bearing U.S. government securities and the income earned on those investments is also for the benefit of our public stockholders.
Our management has broad discretion with respect to the specific application of the net proceeds of the IPO and the private placement, although substantially all of the net proceeds are intended to be applied generally towards consummating a Business Combination.
22
Pursuant to the Non-Redemption Agreement, the Non-Redeeming Stockholder agreed to (a) not redeem the Shares in connection with the vote to amend the Company’s amended and restated certificate of incorporation to extend the date by which the Company has to consummate an initial business combination from October 11, 2022 to April 11, 2023 and (b) vote all of its Shares in favor of the Extension. In connection with the foregoing, Gary Teplis, the Chief Executive Officer of the Company, agreed to pay to the Non-Redeeming Stockholder $0.05 per Share per month through the Extended Date, in a single cash payment within 45 days from the date of the Non-Redemption Agreement.
Results of Operations
As of September 30, 2022, we have not commenced any operations. All activity for the period from August 12, 2020 (inception) through September 30, 2022 relates to our formation and IPO, and, since the completion of the IPO, our searching for a target to consummate a Business Combination. We will not generate any operating revenues until after the completion of a Business Combination, at the earliest. We generate non-operating income in the form of interest income from the proceeds derived from the IPO and placed in the Trust Account.
For the three months ended September 30, 2022, we had a net income of $1,158,637 which included unrealized gain on change in fair value of warrants of $1,389,550, interest income earned on the proceeds in the Trust Account of $222,471 and interest income earned on the operating bank account of $1, partially offset by operating costs of $439,362 and income tax provision of $14,023.
For the nine months ended September 30, 2022, we had a net income of $9,540,916 which included unrealized gain on change in fair value of warrants of $11,915,139, interest income earned on the proceeds in the Trust Account of $534,340 and interest income earned on the operating bank account of $2, partially offset by operating costs of $2,885,762 and income tax provision of $22,803.
For the three months ended September 30, 2021, we had a net loss of $569,008 which included operating costs of $4,903,000, partially offset by unrealized gain on change in fair value of warrants of $4,327,824, interest income earned on the proceeds in the Trust Account of $6,165 and interest income earned on the operating bank account of $3.
For the nine months ended September 30, 2021, we had a net income of $12,043,581 which included unrealized gain on change in fair value of warrants of $17,773,513, interest income earned on the proceeds in the Trust Account of $19,240 and interest income earned on the operating bank account of $23, partially offset by operating costs of $5,749,195.
Liquidity and Capital Resources
As of September 30, 2022, we had cash outside our Trust Account of $24,338 available for working capital needs.
In connection with the stockholder vote to amend the Company’s Amended and Restated Certificate of Incorporation, on June 14, 2022, stockholders holding an aggregate of 24,944,949 shares of our Class A common stock exercised their right to redeem their shares for approximately $10.01 per share of the funds held in our Trust Account, totaling $249,614,847.
On June 16, 2022, pursuant to the trust agreement dated as of December 8, 2020 between the Company and CST, the Company issued a request to CST to withdraw $81,200 of interest income from the Trust Account for the payment of the Company’s taxes.
As of September 30, 2022, we had investments held in the Trust Account of $50,865,089, consisting of mutual funds comprised of U.S. Treasury Bills.
For the nine months ended September 30, 2022, cash used by operating activities was $99,916. Net income of $9,540,916 was impacted by interest income earned on Trust of $534,340, unrealized gain on change in fair value of warrants of $11,915,139, and changes in operating assets and liabilities, which provided $2,808,647 of cash for operating activities.
For the nine months ended September 30, 2021, cash used in operating activities was $630,274. Net income of $12,043,581 was impacted by interest earned on investments held in the Trust Account of $19,240, change in fair value of warrant liability of $17,773,513, and changes in operating assets and liabilities, which provided $5,118,898 of cash for operating activities.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (excluding the deferred underwriters’ discount) to complete our initial Business Combination. We may withdraw interest to pay our taxes and liquidation expenses if we are unsuccessful in completing a Business Combination. We estimate our annual franchise tax obligations to be $200,000, which is the maximum amount of annual franchise taxes payable by us as a Delaware corporation per annum, which we may pay from funds from the IPO held outside of the Trust Account or from interest earned on the funds held in the Trust Account and released to us for this purpose. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the trust account reduced by our operating expense and franchise taxes. We expect the interest earned on the amount in the trust account will be sufficient to pay our income taxes. To the extent that our equity or debt is used, in whole or in part, as consideration to complete our initial 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.
23
On June 2, 2021, we issued an unsecured promissory note to the Sponsor for an aggregate available principal amount of $300,000 to be used for a portion of the expenses of the Business Combination. This loan is non-interest bearing, unsecured and due at the earlier of December 31, 2021 or the closing of the Business Combination. We had no borrowings under the promissory note.
Further, our Sponsor, officers and directors or their respective affiliates may, but are not obligated to, loan us funds as may be required (the “Working Capital Loans”). If we complete a Business Combination, we will repay the Working Capital Loans. In the event that a Business Combination does not close, we may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Such Working Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion. As of September 30, 2022 and December 31, 2021, no Working Capital Loans have been issued.
On November 16, 2021, January 18, 2022, February 1, 2022, April 25, 2022, May 2, 2022, May 13, 2022, June 3, 2022, June 6, 2022, and June 16, 2022, we received $100,000, $100,000, $250,000, $50,000, $100,000, $20,000, $25,000, $177,423 and $66,000 advances from our Sponsor or its affiliates to be used for working capital purposes, respectively. The advances are non-interest bearing and due on demand. As of September 30, 2022 and December 31, 2021, we owed the Sponsor or its affiliates $888,423 and $100,000 related to these advances, respectively.
We have incurred and expect to continue to incur significant costs in pursuit of our acquisition plans. We will need to raise additional capital through loans or additional investments from our Sponsor, stockholders, officers, directors, or third parties. Our officers, directors and Sponsor may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet our working capital needs. Accordingly, we may not be able to obtain additional financing.
In addition, we have until April 11, 2023 to consummate a Business Combination. If we are unable to complete a Business Combination prior to April 11, 2023, we will redeem 100% of the outstanding public shares for a pro rata portion of the funds held in the Trust Account, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to us to pay our franchise and income taxes, divided by the number of then outstanding public shares, subject to applicable law and as further described in registration statement, and then seek to dissolve and liquidate.
As a result of the above, in connection with our assessment of going concern considerations in accordance with FASB’s Accounting Standards Update (“ASU”) 2014-15,“Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management determined that these conditions raise substantial doubt about our ability to continue as a going concern through April 11, 2023, the scheduled liquidation date. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should us be unable to continue as a going concern.
Off-Balance Sheet Financing Arrangements
We did not have any off-balance sheet arrangement as of September 30, 2022.
Contractual Obligations
As of September 30, 2022, we did not have any long-term debt, capital or operating lease obligations. We entered into an administrative services agreement pursuant to which we will pay an affiliate of one of our directors for office space and secretarial and administrative services provided to members of our management team, in an amount not to exceed $10,000 per month. We have incurred $30,000 and $90,000 of administrative service fees for three and nine months ended September 30, 2022, respectively. The payment of the administrative service fee was suspended starting in May 2022.
For the three and nine months ended September 30, 2021, we have incurred 30,000 and $90,000 of administrative service fees, respectively.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following as our critical accounting policies:
Derivative Financial Instruments
We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified on the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. We have determined the warrants are a derivative instrument.
FASB ASC 470-20, Debt with Conversion and Other Options addresses the allocation of proceeds from the issuance of convertible debt into its equity and debt components. We apply this guidance to allocate IPO proceeds from the Units between Class A common stock and warrants, using the residual method by allocating IPO proceeds first to fair value of the warrants and then the Class A common stock.
24
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as liability instruments and is measured at fair value. Conditionally redeemable Class A common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our Class A common stock features certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, at September 30, 2022 and December 31, 2021, 5,055,051 and 30,000,000 shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ deficit section of our balance sheets, respectively.
Net Income (loss) Per Share of Common Stock
We have two classes of common stock, which are referred to as Class A common stock and Class B common stock. Earnings and losses are shared pro rata between the two classes of common stock. The 23,000,000 shares of Class A common stock potentially issuable upon the exercise of outstanding warrants to purchase Class A common stock were excluded from diluted earnings per share for the three and nine months ended September 30, 2022 and 2021 because the warrants are contingently exercisable, and the contingencies have not yet been met. As a result, diluted net income (loss) per share of common stock is the same as basic net income (loss) per share of common stock for the periods presented.
Recent Accounting Standards
In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging- Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for scope exception, and it simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective January 1, 2024 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. We are currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” under the JOBS Act and are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an independent registered public accounting firm’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the independent registered public accounting firm’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation.
These exemptions will apply for a period of five years following the completion of this offering or until we are no longer an “emerging growth company,” whichever is earlier.
25
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
Item 4. Controls and Procedures.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2022. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were effective.
Changes in Internal Control over Financial Reporting
During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
26
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
There are certain risks and uncertainties in our business that could cause our actual results to differ materially from those anticipated. A detailed discussion of our risk factors was included in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 9, 2022. These risk factors should be read carefully in connection with evaluating our business and in connection with the forward-looking statements and other information contained in this Quarterly Report. Any of the risks described in the Annual Report on Form 10-K for the year ended December 31, 2021, could materially affect our business, financial condition or future results and the actual outcome of matters as to which forward-looking statements are made. There have been no material changes to the risk factors set forth in the Annual Report on Form 10-K for the year ended December 31, 2021 except for the following:
A new 1% U.S. federal excise tax could be imposed on us in connection with redemptions by us of our shares.
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the “IR Act”), which, among other things, imposes a 1% excise tax on the fair market value of stock repurchased by “covered corporations” beginning in 2023, with certain exceptions (the “Excise Tax”). The Excise Tax is imposed on the repurchasing corporation itself, not its stockholders from which the stock is repurchased. Because we are a Delaware corporation and our securities are trading on Nasdaq, we are a “covered corporation” for this purpose. The amount of the Excise Tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the Excise Tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of Treasury has been given authority to provide regulations and other guidance to carry out, and prevent the abuse or avoidance of the Excise Tax; however, no guidance has been issued to date. It is uncertain whether, and/or to what extent, the Excise Tax could apply to any redemptions of our public shares after December 31, 2022, including any redemptions in connection with an initial business combination or in the event we do not consummate an initial business combination by the Extended Date.
Any redemption or other repurchase that we make that occurs after December 31, 2022 may be subject to the excise tax. Whether and to what extent we would be subject to the excise tax would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with our initial business combination, (ii) the structure of the business combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with the business combination (or otherwise issued not in connection with the business combination but issued within the same taxable year of the business combination) and (iv) the content of regulations and other guidance from the U.S. Department of the Treasury. In addition, because the excise tax would be payable by us, and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a business combination and limit our ability to complete a business combination.
If we are deemed to be an investment company for purposes of the Investment Company Act, we may be forced to abandon our efforts to complete an initial business combination and instead be required to liquidate the Company. To mitigate the risk of that result, on or prior to the 24-month anniversary of the effective date of the registration statement relating to our IPO, we will instruct Continental Stock Transfer & Trust Company to liquidate the securities held in the trust account and instead hold all funds in the trust account in cash. As a result, following such change, we will likely receive minimal, if any, interest, on the funds held in the trust account, which would reduce the dollar amount that our public stockholders would have otherwise received upon any redemption or liquidation of the Company if the assets in the trust account had remained in U.S. government securities or money market funds.
On March 30, 2022, the SEC issued the SPAC Rule Proposals, relating, among other things, to circumstances in which SPACs such as us could potentially be subject to the Investment Company Act and the regulations thereunder. The SPAC Rule Proposals would provide a safe harbor for such companies from the definition of “investment company” under Section 3(a)(1)(A) of the Investment Company Act, provided that a SPAC satisfies certain criteria. To comply with the duration limitation of the proposed safe harbor, a SPAC would have a limited time period to announce and complete a de-SPAC transaction. Specifically, to comply with the safe harbor, the SPAC Rule Proposals would require a company to file a report on Form 8-K announcing that it has entered into an agreement with a target company for an initial business combination no later than 18 months after the effective date of the registration statement for its initial public offering. The company would then be required to complete its initial business combination no later than 24 months after the effective date of the registration statement for its initial public offering. We understand that the SEC has recently been taking informal positions regarding the Investment Company Act consistent with the SPAC Rule Proposals.
There is currently uncertainty concerning the applicability of the Investment Company Act to a SPAC, including a company like ours, that does not complete its initial business combination within the proposed time frame set forth in the proposed safe harbor rule. As indicated above, we completed our IPO in December 2020 and have operated as a blank check company searching for a target business with which to consummate an initial business combination since such time (or approximately 19 months after the effective date of our IPO, as of the date of this proxy statement). As a result, it is possible that a claim could be made that we have been operating as an unregistered investment company if the SPAC Rule Proposals are adopted as proposed. If we were deemed to be an investment company for purposes of the Investment Company Act, we might be forced to abandon our efforts to complete an initial business combination and instead be required to liquidate the Company. If we are required to liquidate the Company, our investors would not be able to realize the benefits of owning shares in a successor operating business, including the potential appreciation in the value of our shares and warrants or rights following such a transaction, and our warrants or rights would expire worthless.
The funds in the trust account have, since our IPO, been held only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act. As of September 30, 2022, amounts held in trust account included approximately $94,925 of accrued interest. To mitigate the risk of us being deemed to have been operating as an unregistered investment company under the Investment Company Act, we will, on or prior to the 24-month anniversary of the effective
27
date of the registration statement relating to our IPO, or December 8, 2022, instruct Continental Stock Transfer & Trust Company, the trustee with respect to the trust account, to liquidate the U.S. government treasury obligations or money market funds held in the trust account and thereafter to hold all funds in the trust account in cash (i.e., in one or more bank accounts) until the earlier of the consummation of a business combination or our liquidation. Following such liquidation of the assets in our trust account, we will likely receive minimal interest, if any, on the funds held in the trust account, which would reduce the dollar amount our public stockholders would have otherwise received upon any redemption or liquidation of the Company if the assets in the trust account had remained in U.S. government securities or money market funds. This means that the amount available for redemption will not increase in the future, and those stockholders who elect not to redeem their public shares in connection with the Extension Amendment will receive no more than the same per share amount, without additional interest, if they redeem their public shares in connection with a business combination or if the Company is liquidated in the future, in each case as compared with the per share amount they would have received if they had redeemed their public shares in connection with the Extension Amendment.
In addition, even prior to the 24-month anniversary of the effective date of the registration statement relating to our IPO, we may be deemed to be an investment company. The longer that the funds in the trust account are held in short-term U.S. government securities or in money market funds invested exclusively in such securities, even prior to the 24-month anniversary, there is a greater risk that we may be considered an unregistered investment company, in which case we may be required to liquidate. Accordingly, we may determine, in our discretion, to liquidate the securities held in the trust account at any time, even prior to the 24-month anniversary, and instead hold all funds in the trust account in cash, which would further reduce the dollar amount our public stockholders would receive upon any redemption or our liquidation.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
On November 10, 2022, Sam Galeotos notified the Company of his decision to resign from his position on the Board of the Company and from the audit committee of the Board, effective immediately. Mr. Galeotos’ decision to resign was due to increasing responsibilities in his other executive roles and was not related to any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.
28
Item 6. Exhibits.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
Exhibit Index
| * | Filed herewith |
| ** | Furnished herewith |
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ALTITUDE ACQUISITION CORP. | ||||||
| Date: November 14, 2022 | By: | /s/Gary Teplis | ||||
| Name: Gary Teplis | ||||||
| Title: Chief Executive Officer | ||||||
| (Principal Executive Officer) | ||||||
| Date: November 14, 2022 | By: | /s/ Farris Griggs | ||||
| Name: Farris Griggs | ||||||
| Title: Chief Financial Officer | ||||||
| (Principal Financial and Accounting Officer) | ||||||
30