Form 10-Q Enphys Acquisition Corp. For: Mar 31
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E-mailUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 2022
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization)
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(Commission File Number)
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(I.R.S. Employer Identification Number)
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number,
including area code: (646 ) 854-6565
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See
the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐
As of May 19, 2022 there were 34,500,000 Class A ordinary shares, par
value $0.0001 per share, and 8,625,000 Class B ordinary shares, par value $0.0001 per share, issued and outstanding.
Enphys Acquisition Corp.
Quarterly Report on Form 10-Q
| PART I. FINANCIAL INFORMATION | Page No. | |
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Item 1.
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1
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1
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2
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3
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4
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5
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Item 2.
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18 | |
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Item 3.
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21 | |
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Item 4.
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21 | |
| PART II. OTHER INFORMATION |
22 | |
| Item 1. | Legal Proceedings | 22 |
| Item 1A. | Risk Factors | 22 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities | 22 |
| Item 3. | Defaults Upon Senior Securities | 22 |
| Item 4. | Mine Safety Disclosures | 22 |
| Item 5. | Other Information | 22 |
| Item 6. | Exhibits | 23 |
| SIGNATURES | 24 | |
ENPHYS ACQUISITION CORP.
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March 31,
2022
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December 31, 2021 |
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(unaudited)
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ASSETS
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| Current Assets: |
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Cash
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$
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$ | |||||
| Prepaid expenses |
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| Due from Sponsor |
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| Total Current Assets |
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Marketable securities held in Trust Account
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| Prepaid expenses, non-current |
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Total Assets
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$
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$ | |||||
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LIABILITIES, REDEEMABLE CLASS A ORDINARY SHARES SUBJECT TO REDEMPTION AND SHAREHOLDERS’ DEFICIT
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Current Liabilities:
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Accounts payable and accrued expenses
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$
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$ | |||||
| Accrued offering costs |
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Total Current Liabilities
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| Warrant liabilities | ||||||||
| Deferred underwriting commission | ||||||||
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Total liabilities
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COMMITMENTS AND CONTINGENCIES (Note 6)
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| Redeemable Class A Ordinary Shares subject to Possible Redemption: | ||||||||
| Class A ordinary shares, $ |
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Shareholders’ deficit:
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Preference shares, $
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Class B ordinary shares, $
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Additional paid-in capital
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Accumulated deficit
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(
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(
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Total Shareholders’ Deficit
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(
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)
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( |
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Total Liabilities, Redeemable Class A Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit
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$
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The accompanying notes are an integral part of these condensed financial statements.
ENPHYS ACQUISITION CORP.
(UNAUDITED)
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For the Three Months
Ended
March 31,
2022
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For the
Period
From
March 3, 2021
(Inception)
Through
March 31,
2021
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EXPENSES
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Administration fee - related party
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$
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$
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General and administrative
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Total expenses
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LOSS FROM OPERATIONS
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(
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(
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OTHER INCOME
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Earnings from marketable securities held in Trust Account
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Change in fair value of warrant liabilities
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TOTAL OTHER INCOME
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Net income (loss)
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$
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$
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(
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)
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Weighted average number of Class A ordinary shares outstanding, basic and diluted
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Basic and diluted net income per Class A ordinary share
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$
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Weighted average number of Class B ordinary shares outstanding, basic and diluted
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Basic and diluted net income (loss) per Class B ordinary share
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$
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$
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(
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) |
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The accompanying notes are an
integral part of these condensed financial statements.
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2022
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Class B
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Additional
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Ordinary Shares
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Paid-In
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Accumulated
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Shareholders’
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Shares
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Amount
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Capital
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Deficit
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Deficit
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Balance as of January 1, 2022
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$
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$
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$
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(
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$
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(
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Current period accretion of Class A ordinary shares to redemption value
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—
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(
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(
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Net income
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—
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Balance as of March 31, 2022
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$
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$
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$
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(
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$
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(
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FOR THE PERIOD MARCH 2, 2021 (INCEPTION) THROUGH MARCH 31, 2021
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Class B
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Additional
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Ordinary Shares
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Paid-In
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Accumulated
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Shareholders’
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Shares
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Amount
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Capital
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Deficit
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Deficit
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Balance as of March 2, 2021 (inception)
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$
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$
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$
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$
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Issuance of Class B ordinary shares to Sponsor
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Net loss
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—
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(
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(
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Balance as of March 31, 2021
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$
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$
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$
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(
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)
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$
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The accompanying notes are an integral part of these condensed financial statements.
ENPHYS ACQUISITION CORP.
(UNAUDITED)
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For the
Period
From
March 3,
2021
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For the Three Months
Ended
March 31,
2022
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(Inception)
Through
March 31,
2021
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Cash Flows From Operating Activities:
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Net income (loss)
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$
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$
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(
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Adjustments to reconcile net income (loss) to net cash used in operating activities:
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| Earnings on marketable securities held in the Trust Account |
(
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Change in fair value of derivative liabilities
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Changes in operating assets and liabilities:
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Prepaid expenses
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Other assets
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Accounts payable and accrued expenses
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Net Cash Used In Operating Activities
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(
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Cash Flows From Financing Activities:
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Proceeds from repayment of Sponsor note receivable
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Payment of offering costs
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(
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Net Cash Provided By Financing Activities
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Net change in cash
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Cash at beginning of period
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Cash at end of period
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$
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$
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Supplemental disclosure of non-cash financing activities:
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Deferred offering costs included in accrued offering costs
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$
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$
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Current period accretion of Class A ordinary shares to redemption value
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$
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$
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The accompanying notes are an integral part of these condensed financial statements.
ENPHYS ACQUISITION CORP.
(Unaudited)
NOTE 1 - DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS AND GOING CONCERN
Enphys Acquisition Corp. (the “Company”) was incorporated in the Cayman Islands on March 3, 2021. The Company was formed
for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is not limited to a
particular industry or sector for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging
growth companies.
As of March 31, 2022, the Company had not commenced any operations. All activity for the period from March 3, 2021
(inception) through March 31, 2022 relates to the Company’s formation and the initial public offering (“Initial Public Offering”), which is described below. The Company will not generate any operating revenues until after the completion of its
initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year
end.
Initial Financing and Sponsor
The registration statement for the Company’s Initial Public Offering was declared effective on October 5, 2021. On October
8, 2021, the Company consummated the Initial Public Offering of 30.0 million units (“Units” and, with respect to the ordinary shares
included in the Units being offered, the “Public Shares”), generating gross proceeds of $300,000,000 , which is described in Note 3.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private sale (the “Private
Placement”) of an aggregate of 8.0 million warrants (the “Private Placement Warrants”) to Enphys Acquisition Sponsor LLC (the
“Sponsor”) at a purchase price of $1.00 per Private Placement Warrant, generating gross proceeds to the Company in the amount of $8.0 million.
On October 8, 2021, the underwriters purchased an additional 4.5 million Units pursuant to the exercise of the over-allotment option. The Units were sold at an offering price of $10.00 per Unit, generating additional gross proceeds to the Company of $45,000,000 .
Also, in connection with the partial exercise of the over-allotment option, the Sponsor purchased an additional 900,000 Private
Placement Warrants at a purchase price of $1.00 per warrant.
Trust Account
Following the closing of the Initial Public Offering and the exercise of the overallotment option on October 8, 2021, an
amount of $345.0 million ($10.00
per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and $6.9 million from the Private Placement
Warrants were placed in a trust account (“Trust Account”) which may be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”),
with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company,
until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the Trust Account, as described below. The Company deposited the remaining $2.0 million of the net proceeds of the Private Placement Warrants into a bank account for working capital purposes.
Initial Business Combination
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial
Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to
complete a Business Combination successfully. The Company must complete one or more initial Business Combinations with one or more
operating businesses or assets with a fair market value equal to at least 80 % of the net assets held in the Trust Account (as
defined below) (excluding the deferred underwriting commissions and taxes payable on the interest earned on the Trust Account). The Company will only complete a Business Combination if the post-transaction company owns or acquires 50 % or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for it
not to be required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”).
The Company will provide the holders of the outstanding Public Shares (the “Public Shareholders”) with the opportunity to
redeem all or a portion of their Public Shares either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer in connection with the Business Combination. The decision as to
whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company. The Public Shareholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then
in the Trust Account (initially anticipated to be $10.00 per Public Share, plus any pro rata interest then in the Trust Account, net
of taxes payable). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants. The Public Shares subject to redemption are recorded as temporary equity upon the completion of the
Initial Public Offering and subsequently accreted to redemption value in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, Distinguishing
Liabilities from Equity.
The Company will not redeem Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001 (so that it does not then become subject to the U.S. Securities and Exchange Commission’s (“SEC”) “penny stock” rules) or any greater net
tangible asset or cash requirement which may be contained in the agreement relating to the Business Combination. If the Company seeks shareholder approval of the Business Combination, the Company will proceed with a Business Combination if a
majority of the outstanding shares voted are voted in favor of the Business Combination, or such other vote as required by law or stock exchange rule. If a shareholder vote is not required by applicable law or stock exchange listing
requirements and the Company does not decide to hold a shareholder vote for business or other reasons, the Company will, pursuant to its second amended and restated certificate of incorporation (the “Certificate of Incorporation”), conduct the
redemptions pursuant to the tender offer rules of the SEC and file tender offer documents with the SEC prior to completing a Business Combination. If, however, shareholder approval of the transaction is required by 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 its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial
Public Offering 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 the proposed
transaction.
Notwithstanding the foregoing, if the Company seeks shareholder approval of a Business Combination and it does not conduct
redemptions pursuant to the tender offer rules, the Certificate of Incorporation will provide that a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a
“group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15 % of the Public Shares, without the prior consent of the Company.
The Sponsor has agreed (a) to waive its redemption rights with respect to the Founder Shares and Public Shares held by it
in connection with the completion of a Business Combination and (b) not to propose an amendment to the Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemptions in connection with a
Business Combination or to redeem 100 % of its Public Shares if the Company does not complete a Business Combination within the
Combination Period (as defined below) or (ii) with respect to any other provision relating to shares’ rights or pre-business combination activity, unless the Company provides the Public Shareholders with the opportunity to redeem their Public
Shares in conjunction with any such amendment.
If the Company has not completed a Business Combination within 24 months from the closing of the Initial Public Offering (the “Combination Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as
reasonably possible but not more than business days thereafter, redeem the Public Shares, at a per-share price, payable in cash,
equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to pay taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as
shareholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining shareholders and the Company’s
board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating
distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
The holders of the Founders Shares have agreed to waive their liquidation rights with respect to the Founder Shares if the
Company fails to complete a Business Combination within the Combination Period. However, if the holders of Founder Shares acquire Public Shares in or after the Initial Public Offering, such Public Shares will be entitled to liquidating
distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the
Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the
redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00 ).
In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the
extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust
Account to below (i) $10.00 per Public Share or (ii) such lesser amount per Public Share held in the Trust Account as of the date of
the liquidation of the Trust Account, if less than $10.00 per public Share due to reductions in the value of the trust assets, in
each case net of the amount of interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the
Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is
deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust
Account due to claims of creditors by endeavoring to have all vendors, service providers (except for the Company’s independent registered accounting firm), prospective target businesses and other entities with which the Company does business,
execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Going Concern, Liquidity and Management’s Plan
As of March 31, 2022, the Company had $871,413 in operating cash and working capital of $755,354 .
If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity,
which could include, but not necessarily be limited to, suspending the pursuit of a Business Combination. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
As a result of the above, in connection with the Company’s assessment of going concern considerations in accordance with
Financial Accounting Standard Board’s (“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the liquidity condition and date
for mandatory liquidation and dissolution raise substantial doubt about the Company’s ability to continue as a going concern through approximately one year from the date these financial statements were issued. 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 the Company be unable to continue as a going concern.
The Company has incurred and expects to continue to incur significant costs in pursuit of its financing and acquisition
plans. The Company lacks the financial resources it needs to sustain operations for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements. Although no formal agreement exists, the
Sponsor is committed to extend Working Capital Loans as needed (defined in Note 5 below). The Company cannot assure that its plans to consummate an initial Business Combination will be successful. In addition, management is currently evaluating
the impact of the COVID-19 pandemic and its effect on the Company’s financial position, results of its operations and/or search for a target company.
These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern one year
from the date the financial statements are issued. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Risks and Uncertainties
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of
coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve. Management continues
to evaluate the impact of the COVID-19 outbreak and other events (such as the recent invasion by Russia of Ukraine and any further escalation of hostilities related thereto, terrorist attacks, natural disasters or a significant outbreak of
other infectious diseases), on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations, close of the Initial Public Offering
and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying audited financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“US GAAP”)
and pursuant to the rules and regulations of the SEC.
The accompanying unaudited financial statements have been prepared in accordance with U.S. GAAP for interim financial information and Article 8 of Regulation S-X. The
accompanying unaudited condensed financial statements should be read in conjunction with the audited financial states and notes thereto included in the Annual Report on Form 10-K filed by the Company with the SEC on April 22, 2022. In the opinion
of the Company’s management, these condensed financial statements include all adjustments, which are only of a normal and recurring nature, necessary for a fair statement of the Company’s financial position as of March 31, 2022 and the Company’s
results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year ending December 31, 2022.
Emerging Growth Company
The Company is an “emerging growth company,” as
defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), and it may take advantage of certain exemptions from various
reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation
requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on
executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial
accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The
Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can
adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an
emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires the Company’s management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly,
the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did no
Marketable Securities held in Trust Account
The Company’s portfolio of marketable securities held in the Trust Account are comprised solely of U.S. government securities, within the meaning set forth in Section
2(a)(16) of the Investment Company Act, with a maturity of 180 days or less, classified as trading securities. Trading securities are presented on the condensed balance sheets at fair value at the end of each reporting period. Gains and losses
resulting from the change in fair value of these securities and interest and dividends is included in earnings and gains on marketable securities held in Trust Account, in the accompanying Statement of Operations.
Offering Costs associated with an Initial Public Offering
Offering costs were allocated to the separable financial instruments issued in the Initial Public Offering in proportion to the amount of proceeds allocated to such
instruments. Upon completion of the Initial Public Offering, offering costs associated with warrant liabilities are expensed as incurred. Offering costs of $732,238 consisted principally of costs incurred in connection with preparation for the Initial Public Offering. These offering costs, together with the underwriter fees of $18,975,000 were allocated between temporary equity and the Public Warrants. Total offering costs were $33,997,132 which included the fair value of the anchor shares issued of $14,289,894
and the underwriting costs of $18,975,000 and other offering costs of $732,238 . Of these costs, $1,338,187 were allocated to the
warrants and were expensed upon completion of the Initial Public Offering.
Class A Ordinary Shares subject to Possible Redemption
The Company’s Class A ordinary shares contain certain redemption rights that are considered by the Company to be outside of the Company’s control and subject to the occurrence
of uncertain future events. Accordingly, as of March 31, 2022 and December 31, 2021, the Class A ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ equity section of the Company’s
condensed balance sheets.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end
of each reporting period. Such changes are reflected in additional paid-in-capital, or in the absence of additional capital, in accumulated deficit. On March 31, 2022 and December 31, 2021, the Company recorded an accretion of approximately $59,000 and $43.9 million, respectively.
At March 31, 2022 and December 31, 2021, the Class A ordinary shares reflected in the condensed balance sheets is reconciled in the following table:
|
Gross proceeds
|
$
|
|
||
|
Less:
|
||||
|
Issuance costs allocated to Class A ordinary shares
|
(
|
)
|
||
|
Proceeds allocated to Public Warrants
|
(
|
)
|
||
|
(
|
)
|
|||
|
Plus:
|
||||
|
Remeasurement adjustment of carrying value to redemption value
|
|
|||
|
Balance, December 31, 2021
|
$
|
|
||
|
Remeasurement adjustment of carrying value to redemption value
|
|
|||
|
Balance, March 31, 2022
|
$
|
|
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized
for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in
the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to
be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax
benefits as income tax expense. There were no no
There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman income tax regulations, income taxes are not
levied on the Company. Consequently, income taxes are not reflected in the Company’s financial statements.
Net income per share
Net income per share is computed by dividing net income by the weighted average number of ordinary shares outstanding during the period. The Company
applies the two-class method in calculating earnings per share. Earnings and losses are shared pro rata between the two classes of shares. The calculation of diluted income per ordinary share of does not consider the effect of the warrants issued
in connection with the (i) Public Offering and (ii) Private Placement, since their inclusion would be anti-dilutive under the two-class method. As a result, diluted earnings per ordinary share is the same as basic earnings per ordinary share for
the periods presented. The warrants are exercisable to purchase 26,150,000 Class A ordinary shares in the aggregate.
The following table reflects the calculation of basic and diluted net income per ordinary share (in dollars, except per share amounts) for the three months ended March 31,
2022:
|
For the Three Months Ended
March 31, 2022
|
||||
|
Net income
|
$
|
|
||
|
Accretion of temporary equity to redemption value
|
(
|
)
|
||
|
Net income including accretion of temporary equity to redemption value
|
$
|
|
||
|
For the period from March 3, 2021
|
||||||||
|
(Inception) to December 31, 2021
|
||||||||
|
Redeemable
|
Non-Redeemable
|
|||||||
|
Basic and diluted net income per share:
|
||||||||
|
Numerator:
|
||||||||
|
Allocation of net loss including accretion of temporary equity
|
$
|
|
$
|
|
||||
|
Deemed dividend for accretion of temporary equity to redemption value
|
|
|
||||||
|
Allocation of net income
|
$
|
|
$
|
|
||||
|
Denominator:
|
||||||||
|
Weighted-average shares outstanding
|
|
|
||||||
|
Basic and diluted net income (loss) per ordinary share
|
$
|
|
$
|
|
||||
The following table reflects the calculation of basic and diluted net income per ordinary share (in dollars, except per share amounts) for the period from March 3, 2021
(inception) through March 31, 2021:
|
For the Period From
March 3, 2021 (inception)
Through March 31,
2021
|
||||
|
Numerator: Loss allocable to Class B ordinary shares
|
(
|
)
|
||
|
Denominator: Basic and diluted weighted average shares outstanding
|
|
|||
|
Basic and diluted net loss per share, Class B ordinary shares
|
(
|
) | ||
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may
exceed federally insured limits. As of March 31, 2022 and December 31, 2021, the Company has not experienced losses on this account. The Company places its cash with major banks and monitors the credit ratings of such banks.
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid to transfer of a liability, in an orderly transaction between market participants at the
measurement date. US GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
|
●
|
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 or 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.
|
The fair value of the Company’s financial assets and liabilities, except for warrant liabilities, approximates the carrying amounts represented in the balance sheets,
primarily due to their short-term nature (see Note 9).
Warrant Liabilities
The Company accounts for the Public Warrants and the Private Placement Warrants issued in connection with the Initial Public Offering and the Private Placement in
accordance with the guidance contained in FASB ASC Topic 815, “Derivatives and Hedging” whereby under that provision the Public Warrants and the Private Placement Warrants do not meet the criteria for equity treatment and must be recorded as a
liability. Accordingly, the Company classifies the warrant instrument as a liability at fair value and adjust the instrument to fair value at each reporting date. This liability will be re-measured at each balance sheet date until the Public
Warrants and the Private Placement Warrants are exercised or expire, and any change in fair value will be recognized in the Company’s statement of operations. Such warrant classification is also subject to re-evaluation at each reporting period.
Stock Compensation Expense
Stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date and recognized over the requisite service period. To the extent
a stock-based award is subject to a performance condition, the amount of expense recorded in a given period, if any, reflects an assessment of the probability of achieving such performance condition, with compensation recognized once the event is
deemed probable to occur. The fair value of equity awards has been estimated using a market approach. Forfeitures are recognized as incurred. Below are the assumptions utilized to calculate the fair value of the shares using the Monte Carlo method.
Related Parties
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and operational decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
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. This guidance changes how entities account for convertible instruments and contracts in an entity’s own equity and simplifies
the accounting for convertible instruments by removing certain separation models for convertible instruments. This guidance also modifies the guidance on diluted earnings per share calculations. This new guidance is effective for fiscal years,
and interim periods within those fiscal years, beginning after December 15, 2023. The Company is currently evaluating the impact of this ASU on the financial statements.
Management does not believe that any
recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
NOTE 3 - INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold 30,000,000 Units at a purchase price of $10.00 per Unit
generating gross proceeds to the Company in the amount of $300,000,000 . Each Unit consists of one share of the Company’s Class A ordinary shares, par value $0.0001
per share (the “Class A ordinary shares”), and of one redeemable warrant of the Company (each whole warrant, a “Warrant”),
with each whole Warrant entitling the holder thereof to purchase one whole share of Class A Ordinary Shares at a price of $11.50 per share, subject to adjustment.
On October 8, 2021, the underwriters purchased an additional 4,500,000 Units pursuant to the exercise of the over-allotment option. The Units were sold at an offering price of $10.00 per Unit, generating additional gross proceeds to the Company of $45,000,000 .
NOTE 4 - PRIVATE PLACEMENTS
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private sale (the “Private
Placement”) of an aggregate of 8,000,000 warrants (the “Private Placement Warrants”) to Enphys Acquisition Sponsor LLC (the “Sponsor”)
at a purchase price of $1.00 per Private Placement Warrant, generating gross proceeds to the Company in the amount of $8,000,000 .
In connection with the exercise of the over-allotment option, the Sponsor purchased an additional 900,000 Private Placement Warrants at a purchase price of $1.00 per warrant.
A portion of the proceeds from the Private Placement Units was added to the proceeds from the Initial Public Offering held in
the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Units held in the Trust Account will be used to fund the redemption of the Public Shares
(subject to the requirements of applicable law) and the Private Placement Units will be worthless.
The Private Placement Warrants (including the Class A ordinary shares issuable upon exercise of the Private Placement
Warrants) will not be transferable, assignable or salable until 30 days after the completion of an Initial Business Combination,
subject to certain exceptions.
NOTE 5 - RELATED PARTIES
Founder Shares
During the period ended March 4, 2021, the Sponsor received 7,187,500 of the Company’s Class B ordinary shares (the “Founder Shares”) for an aggregate price of $25,000 in exchange for paying certain expenses on behalf of the Company. On October 5, 2021, the Company effected a share capitalization issuing 0.2 of a share for each ordinary share in issue, resulting in the Sponsor holding an aggregate of 8,625,000 Founder Shares. The Founder Shares included an aggregate of up to 1,125,000
shares subject to forfeiture to the extent that the underwriters’ over-allotment was not exercised in full or in part, so that the number of Founder Shares would equal, on an as-converted basis, approximately 20 % of the Company’s issued and outstanding ordinary shares after the Initial Public Offering. Upon exercise of the underwriter’s overallotment
option, these shares are no longer subject to forfeiture. Concurrent with the offering, the Sponsor transferred 20,000 80,000
Founder Shares were not subject to forfeiture in the event that the underwriter’s did not exercise the over-allotment option. Upon transfer of these shares, the Company recorded $557,600 of share-based compensation for services provided by the independent directors.
Upon close of the Initial Public Offering, the anchor investors received 2,050,200 6.97 per share or an aggregate of $14,289,894
which was treated as an offering cost in accordance with Staff Accounting Bulletin 5A. Accordingly, the offering cost was allocated to the separable financial instruments issued in the Initial Public Offering in the same proportion that the
proceeds were allocated to such instruments.
The initial shareholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder
Shares until the earlier to occur of: (A) one year after the completion of a Business Combination and (B) subsequent to a Business
Combination, (x) if the last reported sale price of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for
stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 -trading day period commencing at least 150
days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Public Shareholders having the right to exchange their shares
of ordinary shares for cash, securities or other property.
Promissory Note
On March 4, 2021, the Sponsor issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to which
the Company may borrow up to an aggregate principal amount of $300,000 . The Promissory Note is non-interest bearing and payable on the
earlier of (i) December 31, 2021 or (ii) the consummation of the Initial Public Offering. As of March 31, 2022 and December 31, 2021, there was no
Administrative Services Agreement
Commencing on the date the Units are first listed on the NYSE, the Company has agreed to pay the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of the Initial Business Combination or the
Company’s liquidation, the Company will cease paying these monthly fees. During the three months ended March 31, 2022, the Company recorded $30,000 in fees pursuant to the agreement, which are recorded to the condensed statements of operations.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor,
or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon
completion of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of the notes may be converted
upon completion of a Business Combination into warrants at a price of $1.00 per warrant. Such warrants would be identical to the
Private Placement Warrants. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be
used to repay the Working Capital Loans. As of March 31, 2022 and December 31, 2021, there were no
NOTE 6 - COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working
Capital Loans (and any shares of ordinary shares issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) will be entitled to
registration rights pursuant to a registration rights agreement to be signed prior to or on the effective date of the Initial Public Offering requiring the Company to register such securities for resale (in the case of the Founder Shares, only
after conversion to shares of Class A ordinary shares). The holders of these securities will be entitled to make up to three demands,
excluding short form registration demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to completion of a Business
Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not be required to effect or permit any
registration or cause any registration statement to become effective until the securities covered thereby are released from their lock-up restrictions. The Company will bear the expenses incurred in connection with the filing of any such
registration statements.
Underwriting Agreement
The Company granted the underwriters a 45-day option from the date of the Initial Public Offering to purchase up to 4,500,000
additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions.
The underwriters were entitled to a cash underwriting discount of $0.20 per Unit, or $6,000,000 in the aggregate (or $6,900,000 in the aggregate if the underwriters’ over-allotment option is exercised in full), payable upon the closing of the Initial Public Offering.
In addition, the underwriters were entitled to a deferred fee of $0.35 per Unit, or $10,500,000 in the aggregate (or $12,075,000 in the aggregate if
the underwriters’ over-allotment option is exercised in full). The deferred underwriting fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes the Business
Combination, subject to the terms of the underwriting agreement.
On October 8, 2021, the underwriters purchased an additional 4,500,000 Units pursuant to the exercise of the over-allotment option. The Units were sold at an offering price of $10.00 per Unit, generating additional gross proceeds to the Company of $45,000,000 .
NOTE 7 - SHAREHOLDER’S EQUITY
Preference Shares - The Company is authorized to issue 1,000,000 shares of preference shares with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of March 31, 2022 and
December 31, 2021, there were no
Class A Ordinary Shares - The Company is authorized to issue 300,000,000 shares of Class A ordinary shares with a par value of $0.0001 per share. Holders of Class A ordinary shares are entitled to one
vote for each share. As of March 31, 2022 and December 31, 2021, there were 34,500,000 34,500,000
Class B Ordinary Shares - The Company is authorized to issue 30,000,000 shares of Class B ordinary shares with a par value of $0.0001 per share. Holders of Class B ordinary shares are entitled to one
vote for each share. As of March 31, 2022 and December 31, 2021, there were 8,625,000 6,494,800 by Sponsor, 80,000 by
independent directors and 2,050,200 by anchor investors.
Only holders of the Class B ordinary shares will have the right to vote on the election of directors prior to the Business
Combination. Holders of Class A ordinary shares and holders of Class B ordinary shares will vote together as a single class on all matters submitted to a vote of our shareholders except as otherwise required by law. In connection with our initial
Business Combination, we may enter into a shareholders agreement or other arrangements with the shareholders of the target or other investors to provide for voting or other corporate governance arrangements that differ from those in effect upon
completion of this offering.
The shares of Class B ordinary shares will automatically convert into Class A ordinary shares at the time of a Business
Combination, or earlier at the option of the holder, on a one-for-one basis, subject to adjustment. In the case that additional shares
of Class A ordinary shares, or equity-linked securities, are issued or deemed issued in excess of the amounts issued in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which shares of Class B
ordinary shares shall convert into shares of Class A ordinary shares will be adjusted (unless the holders of a majority of the then-outstanding shares of Class B ordinary shares agree to waive such adjustment with respect to any such issuance or
deemed issuance) so that the number of shares of Class A ordinary shares issuable upon conversion of all shares of Class B ordinary shares will equal, in the aggregate, on an as-converted basis, 20 % of the sum of the total number of all shares of ordinary shares outstanding upon the completion of Initial Public Offering plus all shares of Class A ordinary shares and
equity-linked securities issued or deemed issued in connection with a Business Combination (net of the number of shares of Class A ordinary shares redeemed in connection with a Business Combination), excluding any Class A ordinary shares or
equity-linked securities issued or issuable to any seller of an interest in the target to us in a Business Combination and any Private Placement Warrants issued to the Sponsor.
NOTE 8 - WARRANT LIABILITIES
The Company accounts for the 26,150,000
warrants to be issued in connection with the Initial Public Offering (representing 17,250,000 Public Warrants and 8,900,000 Private Placement Warrants) in accordance with the guidance contained in ASC Topic 815-40. Such guidance provides that because the warrants
do not meet the criteria for equity treatment thereunder, each warrant must be recorded as a liability. Accordingly, the Company will classify each warrant as a derivative liability at its fair value.
Offering costs will be allocated to the Class A ordinary Shares and Public Warrants, and the amounts allocated to the Public
Warrants will be expensed immediately. This liability is subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized in the
Company’s statement of operations.
Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of
the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the
completion of a Business Combination and (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will
expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any shares of Class A ordinary share pursuant to the exercise of a warrant and
will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class A ordinary shares issuable upon exercise of the warrants is then effective and a current
prospectus relating to those shares of Class A ordinary shares is available, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable for
cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the
state of residence of the exercising holder, or an exemption from registration is available.
The Company has agreed that as soon as practicable, but in no event later than 20 business days after the closing of a Business Combination, the Company will use its commercially reasonable efforts to file, and within 60 business days following a Business Combination to have declared effective, a registration statement covering the issuance of the shares of Class A
ordinary shares issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of Class A ordinary shares until the warrants expire or are redeemed. Notwithstanding the above, if the Class A ordinary share is
at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of
Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a
registration statement, but will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption of Warrants When the Price per Share of Class A Ordinary
Share Equals or Exceeds $18.00 - Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:
| • |
in whole and not in part;
|
| • |
at a price of $
|
| • |
upon a minimum of
|
| • |
if, and only if, the last reported sale price of the Class A ordinary shares equals or exceeds $
|
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable
to register or qualify the underlying securities for sale under all applicable state securities laws.
Redemption of Warrants When the Price per Share of Class A Ordinary
Share Equals or Exceeds $10.00 - Once the warrants become exercisable, the Company may redeem the outstanding warrants:
| • |
in whole and not in part;
|
| • |
at a price of $
|
| • |
upon a minimum of
|
| • |
if, and only if, the last reported sale price of the Class A ordinary share equals or exceeds $
|
| • |
if, and only if, the private placement warrants are also concurrently exchanged at the same price (equal to a number of shares of Class A ordinary share) as the outstanding public
warrants, as described above.
|
If the Company calls the Public Warrants for redemption, as described above, its management will have the option to require
any holder that wishes to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of ordinary shares issuable upon exercise of the Public Warrants may be adjusted in
certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of
ordinary shares at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the
Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the
Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
The Private Placement Warrants will be identical to the Public Warrants underlying the Units being sold in the Initial Public
Offering, except that the Private Placement Warrants and the Class A ordinary shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless
basis and be non-redeemable, except as described above, so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted
transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
NOTE 9. FAIR VALUE MEASUREMENTS
The following table presents information about the Company’s assets and liabilities that are measured at fair value at March
31, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
|
Description
|
Level
|
March 31,
2022 |
December 31,
2021
|
|||||||||
|
Assets:
|
||||||||||||
|
Investments held in Trust Account
|
1
|
$
|
|
$
|
|
|||||||
|
Liabilities:
|
||||||||||||
|
Warrant liability – Private Placement Warrants
|
2
|
$
|
|
$
|
|
|||||||
|
Warrant liability – Public Warrants
|
1
|
|
|
|||||||||
|
$
|
|
$
|
|
|||||||||
The Warrants are measured at fair value on a recurring basis. Upon initial issuance, the Company used a Monte Carlo simulation
model to value the Public Warrants and a modified Black-Scholes model to value the Private Placement Warrants. Upon initial issuance, the Public Warrants and the Private Placement Warrants were classified within Level 3 of the fair value hierarchy
at the measurement dates due to the use of unobservable inputs. Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs. As of March 31, 2022 and December
31, 2021, the fair value of the Public Warrants is determined using quoted market prices and are classified as Level 1, and the Private Warrants are benchmarked to the fair value of the Public Warrants and are classified as Level 2.
The following table provides a summary of the changes in the fair value of the Company’s financial instruments that are
measured at fair value on a recurring basis:
|
Private
Placement
Warrants
|
Public
Warrants
|
Total
|
||||||||||
|
Fair value at December 31, 2021
|
$
|
|
$
|
|
$
|
|
||||||
|
Change in fair value
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Fair value at March 31, 2022
|
$
|
|
$
|
|
$
|
|
||||||
As of March 31, 2022 and December 31, 2021, the derivative liability was $7,163,700 and $12,949,000 , respectively. In addition, for the
three months ended March 31, 2022, the Company recorded $5,785,300 as an unrealized gain on the change in fair value of the derivative
warrants in the condensed statements of operations.
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
References to “we,” “us,” “company” or “our company” are to Enphys Acquisition Corp. The following discussion and analysis of the Company’s financial condition and results of
operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
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 U.S. Securities and Exchange Commission (“SEC”) filings.
Overview
We are a newly incorporated blank check company, incorporated as a Cayman Islands exempted company for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share
purchase, reorganization or other similar business combination with one or more businesses. We have not selected any business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or
indirectly, with any business combination target. We intend to effectuate our initial business combination using cash from the proceeds of this offering and the sale of the private placement warrants, our shares, debt or a combination of cash,
shares and debt.
The issuance of additional ordinary shares or preference shares in a business combination:
• may significantly dilute the equity interest of investors in this offering, which dilution would increase if the anti-dilution provisions in the Class B ordinary shares
resulted in the issuance of Class A ordinary shares on a greater than one-to-one basis upon conversion of the Class B ordinary shares;
• may subordinate the rights of holders of ordinary shares if preference shares are issued with rights senior to those afforded our ordinary shares;
• could cause a change of control if a substantial number of our ordinary shares is issued, which may affect, among other things, our ability to use our net operating loss
carry forwards, if any, and could result in the resignation or removal of our present directors and officers;
• may have the effect of delaying or preventing a change of control of us by diluting the share ownership or voting rights of a person seeking to obtain control of us;
• may adversely affect prevailing market prices for our units, ordinary shares and/or warrants; and
• may not result in adjustment to the exercise price of our warrants. Similarly, if we issue debt or otherwise incur significant indebtedness, it could result in:
• default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations;
• acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the
maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;
• our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand;
• our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding;
• our inability to pay dividends on our ordinary shares;
• using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our ordinary shares if
declared, expenses, capital expenditures, acquisitions and other general corporate purposes;
• limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
• increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and
• limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other
purposes and other disadvantages compared to our competitors who have less debt.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities since inception have been organizational activities and those necessary to
prepare for our initial public offering. We will not generate any operating revenues until after completion of our initial business combination. We generate non-operating income in the form of interest income on cash and cash equivalents. There has
been no significant change in our financial or trading position and no material adverse change has occurred since the date of our audited financial statements. We expect to incur substantially increased 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, 2022, we had net income of $5,657,484, which consisted of general and administrative expenses
of $186,872 offset by $5,785,300 for the net change in derivative liabilities and earnings and gains on marketable securities in the Trust Account of $59,056.
For the period from March 3, 2021 (inception) through March 31, 2022, we had a
net loss of $8,530, which consisted solely of general and administrative expenses.
Liquidity and Capital Resources
As of March 31, 2022, the Company had $871,413 in cash and working capital of
$755,354.
Prior to the completion of the Initial Public Offering, our liquidity needs had been satisfied by a contribution of $25,000 from our Sponsor to cover for certain offering
costs in exchange for the issuance of the Founder Shares, the loan of $300,000 from our Sponsor pursuant to a promissory note (“Note”), and the proceeds from the consummation of the Private Placement not held in the Trust Account. As of March 31,
2022, no amount under the Note remains outstanding. In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor may, but is not obligated to, provide us working capital loans. To date, there were no
amounts outstanding under any working capital loan.
Based on the foregoing, our management believes that we will have sufficient working capital and borrowing capacity to meet our needs through the earlier of the consummation
of a Business Combination or one year from this filing. Over this time period, we will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due
diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Management does not believe that we will need to raise additional funds following our initial public offering in order to meet the expenditures required for operating our
business. Subsequent to the consummation of the Initial Public Offering, the Company’s liquidity will be satisfied through the net proceeds from the consummation of the Initial Public Offering and the Private Placement held outside of the Trust
Account. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds
available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of
our public shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination.
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that the specific impact is not readily determinable as of the date of the financial
statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Contractual Obligations
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any, (and any shares of Class A common
stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares) are entitled to registration rights pursuant to a registration
rights agreement. These holders will be entitled to certain demand and “piggyback” registration rights. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriters a 45-day option from the final prospectus relating to the IPO to purchase up to 4,500,000 additional Units to cover over-allotments, if any, at the
IPO price less the underwriting discounts and commissions. On October 8, 2021, the underwriters purchased an additional 4,500,000 Units pursuant to the exercise of the over-allotment option. The Units were sold at an offering price of $10.00 per
Unit, generating additional gross proceeds to the Company of $45.0 million.
The underwriters were paid a cash underwriting discount of $0.20 per Public Share, or $6.9 million in the aggregate. In addition, $0.35 per Public Share, or approximately $12.1
million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business
Combination, subject to the terms of the underwriting agreement.
Related Party Transactions
Please refer to Note 5, Related Parties, in “Part 1. Financial Information - Item 1. Financial Statements” for a discussion of our related party
transactions.
Critical Accounting Policies and Estimates
The preparation of unaudited condensed 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 condensed financial statements, and income and expenses during the
periods reported. Actual results could materially differ from those estimates. There were no critical accounting policies that contain significant judgment or estimates. Refer to Note 2 for the Company’s accounting policies.
Recent Accounting Pronouncements
Please refer to Note 2, Summary of Significant Accounting Policies, in “Part 1. Financial Information - Item 1. Financial Statements”
for a discussion of recent accounting pronouncements and their anticipated effect on our business.
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” and
under the JOBS Act 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 auditor’s attestation report on our system of internal control over financial
reporting pursuant to Section 404 of the Sarbanes Oxley Act, (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 auditor’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 our initial public offering or until we are no longer an “emerging growth company,” whichever is earlier.
| 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
|
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 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 company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we
conducted an evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that as of March 31, 2022, our disclosure controls
and procedures were effective.
We previously identified a material weakness as of December 31, 2021 related to the (a) control environment which resulted in inadequate oversight over
the performance of controls and our control activities and (b) control activities which resulted in the failure to design and implement controls which provided a sufficient level of precision around the accounting of offering costs and the failure
to properly design and implement controls over the presentation of earnings per share as well as required financial statement disclosures. The Company implemented new controls to ensure that our financial
statements are prepared in accordance with U.S. generally accepted accounting principles. The Company tested the controls that were implemented and concluded that the controls were operating effectively as of
March 31, 2022. As a result, management concluded that the material weakness was remediated as of March 31, 2022.
A material weakness, as defined in the SEC regulations, is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility
that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2022 covered by this Quarterly Report on Form 10-Q
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Based on the evaluation we conducted, other than remediation of the material weakness identified and discussed above, our
management has concluded that no such changes have occurred.
| Item 1. |
Legal Proceedings
|
None.
| Item 1A. |
Risk Factors.
|
A description of the risks associated with our business, financial condition, and
results of operations is set forth in Part I, Item 1A, "Risk Factors" of our annual report on Form 10-K filed with the SEC on April 22, 2022 (“Form 10-K). Except as set forth below, as of the date of this Quarterly Report on Form 10-Q, there have been no material changes from the risk factors previously disclosed
in our Form 10-K.
If we are deemed to be an investment company under the Investment Company Act, we may be required to
institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete our initial business combination.
If we are deemed to be an investment company under the Investment Company Act, our activities may be restricted, including
restrictions on the nature of our investments and restrictions on the issuance of securities, each of which may make it difficult for us to complete our initial business combination. In addition, we may have imposed upon us burdensome
requirements, including registration as an investment company, adoption of a specific form of corporate structure and reporting, record keeping, voting, proxy and disclosure requirements and other rules and regulations.
On March 30, 2022, the SEC issued proposed rules relating to, among other matters, the extent to which blank check companies
like our company could become subject to regulation under the Investment Company Act. The SEC’s proposed rule under the Investment Company Act would provide a safe harbor from the definition of “investment company” under Section 3(a)(1)(A) of the
Investment Company Act, provided that the company satisfies certain conditions that limit a company’s duration, asset composition, business purpose and activities. The duration component of the proposed safe harbor rule would require a company
like our company to file a report on Form 8-K with the SEC announcing that it has entered into an agreement with the target company (or companies) to engage in an initial business combination no later than 18 months after the effective date of
the registration statement for the 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 its registration statement for its initial public
offering.
If we were deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would
require additional expenses for which we have not allotted funds and may hinder our ability to consummate our initial business combination.
Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect
our business, investments and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments. In particular, we will be
required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application
also may change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied,
could have a material adverse effect on our business and results of operations.
On March 30, 2022, the SEC issued proposed rules relating to, among other items, enhancing disclosures in business
combination transactions involving SPACs and private operating companies; amending the financial statement requirements applicable to transactions involving shell companies; effectively limiting the use of projections in SEC filings in connection
with proposed business combination transactions; increasing the potential liability of certain participants in proposed business combination transactions; and the extent to which SPACs could become subject to regulation under the Investment
Company Act of 1940. These rules, if adopted, whether in the form proposed or in revised form, may materially adversely affect our ability to negotiate and complete our initial business combination and may increase the costs and time related
thereto.
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds
|
Substantially concurrently with the closing of our initial public offering, we consummated the private
placement of 8,900,000 Private Placement Warrants to the Sponsor at an aggregate price of, and generating gross proceeds to the Company of $8,900,000, $6,900,000 of which was
placed in the Trust Account.
On March 4, 2021, the Sponsor issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to which the Company may borrow up to
an aggregate principal amount of $300,000. The Promissory Note is non-interest bearing and payable on the earlier of (i) December 31, 2021 or (ii) the consummation of the Initial Public Offering. As of March 31, 2022, there was no amount
outstanding under the Promissory Note.
| Item 3. |
Defaults Upon Senior Securities
|
None.
| Item 4. |
Mine Safety Disclosures
|
Not applicable.
| Item 5. |
Other Information
|
None.
| Item 6. |
Exhibits.
|
|
Exhibit
Number
|
Description
|
|
|
Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
|
||
|
Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
|
||
|
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
|
||
|
Certification of Chief 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 Label
|
||
|
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.
|
| ** |
Furnished.
|
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.
|
ENPHYS ACQUISITION CORP.
|
||
|
Date: May 20, 2022
|
By:
|
/s/ Pär Lindström
|
|
Name: Pär Lindström
|
||
|
Title: Chief Financial Officer
|
||
24
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