UNITED STATES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 2021
OR
2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-40001
Commission file number: 001-40001
Compute Health Acquisition Corp.
(Exact name of registrant as specified in its charter)
| Delaware | 85-3449307 | |
| (State or other jurisdiction of incorporation) | (I.R.S. Employer Identification Number) |
1105 North Market Street,
| ||
| (Address of principal executive offices) | (Zip Code) |
(212) 829 3500
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class: | Trading Symbol(s) | Name of Each Exchange on Which Registered: | ||
| Units, each consisting of one share of Class A common stock and one-quarter of one redeemable warrant | CPUH.U | New York Stock Exchange | ||
| Class A common stock, par value $0.0001 per share | CPUH | New York Stock Exchange | ||
| Redeemable warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50 | CPUH WS | New York Stock Exchange |
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.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☒ |
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 November 16, 2021,August 15, 2022, 86,250,000 shares of Class A common stock, $0.0001 par value, and 21,562,500 shares of Class B common shares, par value $0.0001 per share, issued and outstanding.
COMPUTE HEALTH ACQUISITION CORP.
Quarterly Report on Form 10-Q
Table of Contents
i
PART I—FINANCIALI-FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
COMPUTE HEALTH ACQUISITION CORP.
CONDENSED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (Unaudited) | ||||||||
| Assets: | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 958,654 | $ | 47,090 | ||||
| Prepaid expenses | 948,973 | - | ||||||
| Total current assets | 1,907,627 | 47,090 | ||||||
| Investments held in Trust Account | 862,533,417 | - | ||||||
| Deferred offering costs associated with initial public offering | - | 282,875 | ||||||
| Total Assets | $ | 864,441,044 | $ | 329,965 | ||||
| Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Equity (Deficit): | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 267,756 | $ | 117,911 | ||||
| Accrued expenses | 552,893 | 21,614 | ||||||
| Franchise tax payable | 147,447 | 609 | ||||||
| Note payable – related party | - | 170,000 | ||||||
| Total current liabilities | 968,096 | 310,134 | ||||||
| Derivative warrant liabilities | 33,363,960 | - | ||||||
| Deferred underwriting commissions | 30,187,500 | - | ||||||
| Promissory note – related party | 1,384,970 | - | ||||||
| Total liabilities | 65,904,526 | 310,134 | ||||||
| Commitments and Contingencies | ||||||||
| Class A common stock subject to possible redemption, $0.0001 par value; 86,250,000 and -0- shares issued and outstanding at $10.00 per share redemption price at September 30, 2021 and December 31, 2020, respectively | 862,500,000 | - | ||||||
| Stockholders’ Equity (Deficit): | ||||||||
| Preferred stock, $0.0001 par value; 3,000,000 shares authorized; none issued and outstanding | - | - | ||||||
| Class A common stock, $0.0001 par value; 300,000,000 shares authorized at September 30, 2021 and December 31, 2020 | - | - | ||||||
| Class B common stock, $0.0001 par value; 30,000,000 shares authorized; 21,562,500 shares issued and outstanding at September 30, 2021 and December 31, 2020 | 2,156 | 2,156 | ||||||
| Additional paid-in capital | - | 22,844 | ||||||
| Accumulated deficit | (63,965,638 | ) | (5,169 | ) | ||||
| Total stockholders’ equity (deficit) | (63,963,482 | ) | 19,831 | |||||
| Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Equity (Deficit) | $ | 864,441,044 | $ | 329,965 | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
COMPUTE HEALTH ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
| Three Months Ended September 30, 2021 | Nine Months Ended September 30, 2021 | |||||||
| General and administrative expenses | $ | 419,772 | $ | 1,427,282 | ||||
| Franchise tax expenses | 49,863 | 147,452 | ||||||
| Loss from operations | (469,635 | ) | (1,574,734 | ) | ||||
| Other income (expense) | ||||||||
| Change in fair value of derivative warrant liabilities | 19,343,750 | 6,148,010 | ||||||
| Change in fair value of promissory note – related party | 297,230 | 152,050 | ||||||
| Loss on promissory note – related party | - | (37,020 | ) | |||||
| Financing costs - derivative warrant liabilities | - | (1,406,506 | ) | |||||
| Income from investments held in Trust Account | 13,251 | 33,417 | ||||||
| Income before income tax | 19,184,596 | 3,315,217 | ||||||
| Income tax expense | - | - | ||||||
| Net income | $ | 19,184,596 | $ | 3,315,217 | ||||
| Basic and diluted weighted average shares outstanding of Class A common stock | 86,250,000 | 73,928,571 | ||||||
| Basic and diluted net income per share, Class A common stock | $ | 0.18 | $ | 0.03 | ||||
| Basic and diluted weighted average shares outstanding of Class B common stock | 21,562,500 | 21,160,714 | ||||||
| Basic and diluted net income per share, Class B common stock | $ | 0.18 | $ | 0.03 | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
COMPUTE HEALTH ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
| Common Stock | Additional | Total Stockholder’ | ||||||||||||||||||||||||||
| Class A | Class B | Paid-In | Accumulated | Equity | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance - December 31, 2020 | - | $ | - | 21,562,500 | $ | 2,156 | $ | 22,844 | $ | (5,169 | ) | $ | 19,831 | |||||||||||||||
| Excess of cash received over fair value of the private placement warrants | - | - | - | - | 4,491,670 | - | 4,491,670 | |||||||||||||||||||||
| Accretion of Class A common stock to redemption amount | - | - | - | - | (4,514,514 | ) | (67,275,686 | ) | (71,790,200 | ) | ||||||||||||||||||
| Net loss | - | - | - | - | - | (5,184,207 | ) | (5,184,207 | ) | |||||||||||||||||||
| Balance - March 31, 2021 (unaudited) (restated - See Note 2) | - | - | 21,562,500 | 2,156 | - | (72,465,062 | ) | (72,462,906 | ) | |||||||||||||||||||
| Net loss | - | - | - | - | - | (10,685,172 | ) | (10,685,172 | ) | |||||||||||||||||||
| Balance - June 30, 2021 (unaudited) (restated - See Note 2) | - | $ | - | 21,562,500 | $ | 2,156 | $ | - | $ | (83,150,234 | ) | $ | (83,148,078 | ) | ||||||||||||||
| Net income | - | - | - | - | - | 19,184,596 | 19,184,596 | |||||||||||||||||||||
| Balance - September 30, 2021 (unaudited) | - | $ | - | 21,562,500 | $ | 2,156 | $ | - | $ | (63,965,638 | ) | $ | (63,963,482 | ) | ||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
COMPUTE HEALTH ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENT OF CASH FLOWSBALANCE SHEETS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
| Cash Flows from Operating Activities: | ||||
| Net income | $ | 3,315,217 | ||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||
| Change in fair value of derivative warrant liabilities | (6,148,010 | ) | ||
| Change in fair value of promissory note – related party | (152,050 | ) | ||
| Loss on promissory note – related party | 37,020 | |||
| Financing costs - derivative warrant liabilities | 1,406,506 | |||
| Income from investments held in Trust Account | (33,417 | ) | ||
| Changes in operating assets and liabilities: | ||||
| Prepaid expenses | (948,973 | ) | ||
| Accounts payable | 263,232 | |||
| Accrued expenses | 158,910 | |||
| Franchise tax payable | 146,838 | |||
| Net cash used in operating activities | (1,954,727 | ) | ||
| Cash Flows from Investing Activities | ||||
| Cash deposited in Trust Account | (862,500,000 | ) | ||
| Net cash used in investing activities | (862,500,000 | ) | ||
| Cash Flows from Financing Activities: | ||||
| Proceeds from note payable to related party | 2,000 | |||
| Repayment of note payable to related party | (266,099 | ) | ||
| Proceeds received from initial public offering, gross | 862,500,000 | |||
| Proceeds from private placement | 19,250,000 | |||
| Offering costs paid | (17,619,610 | ) | ||
| Proceeds from promissory note to related party | 1,500,000 | |||
| Net cash provided by financing activities | 865,366,291 | |||
| Net change in cash | 911,564 | |||
| Cash - beginning of the period | 47,090 | |||
| Cash - end of the period | $ | 958,654 | ||
| Supplemental disclosure of noncash financing activities: | ||||
| Offering costs included in accrued expenses | $ | 372,369 | ||
| Offering costs paid by related party under promissory note | $ | 94,099 | ||
| Deferred underwriting commissions | $ | 30,187,500 | ||
| Reversal of offering costs included in accounts payable in prior year | $ | 113,386 | ||
| June 30, 2022 | December 31, 2021 | |||||||
| (unaudited) | ||||||||
| Assets: | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 66,794 | $ | 836,874 | ||||
| Prepaid expenses | 470,608 | 774,677 | ||||||
| Total current assets | 537,402 | 1,611,551 | ||||||
| Investments held in Trust Account | 863,845,224 | 862,549,773 | ||||||
| Total Assets | $ | 864,382,626 | $ | 864,161,324 | ||||
| Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit: | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 10,890 | $ | 8,047 | ||||
| Accrued expenses | 2,000 | 162,917 | ||||||
| Franchise tax payable | 20,000 | 200,045 | ||||||
| Income tax payable | 219,373 | - | ||||||
| Total current liabilities | 252,263 | 371,009 | ||||||
| Derivative warrant liabilities | 7,567,080 | 30,268,330 | ||||||
| Deferred underwriting commissions | 30,187,500 | 30,187,500 | ||||||
| Promissory note – related party | 1,391,290 | 1,392,950 | ||||||
| Deferred legal costs | 1,471,696 | 957,588 | ||||||
| Total liabilities | 40,869,829 | 63,177,377 | ||||||
| Commitments and Contingencies | ||||||||
| Class A common stock subject to possible redemption, $0.0001 par value; 86,250,000 shares issued and outstanding at $10.01 per share redemption value at June 30, 2022 and December 31, 2021 | 863,225,192 | 862,500,000 | ||||||
| Stockholders’ Deficit: | ||||||||
| Preferred stock, $0.0001 par value; 3,000,000 shares authorized; none issued or outstanding at June 30, 2022 and December 31, 2021 | - | - | ||||||
| Class A common stock, $0.0001 par value; 300,000,000 shares authorized ; no non-redeemable shares issued or outsanding at June 30, 2022 and December 31, 2021 | - | - | ||||||
| Class B common stock, $0.0001 par value; 30,000,000 shares authorized; 21,562,500 shares issued and outstanding at June 30, 2022 and December 31, 2021 | 2,156 | 2,156 | ||||||
| Additional paid-in capital | - | - | ||||||
| Accumulated deficit | (39,714,551 | ) | (61,518,209 | ) | ||||
| Total stockholders’ deficit | (39,712,395 | ) | (61,516,053 | ) | ||||
| Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit | $ | 864,382,626 | $ | 864,161,324 | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
COMPUTE HEALTH ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| General and administrative expenses | $ | 616,731 | $ | 663,775 | $ | 1,150,155 | $ | 1,007,510 | ||||||||
| Franchise tax expenses | 50,000 | 49,315 | 100,000 | 97,589 | ||||||||||||
| Loss from operations | (666,731 | ) | (713,090 | ) | (1,250,155 | ) | (1,105,099 | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Change in fair value of derivative warrant liabilities | 9,453,450 | (9,802,990 | ) | 22,701,250 | (13,195,740 | ) | ||||||||||
| Change in fair value of promissory note – related party | (39,930 | ) | (145,180 | ) | 1,660 | (145,180 | ) | |||||||||
| Loss on promissory note - related party | - | (37,020 | ) | - | (37,020 | ) | ||||||||||
| Financing costs - derivative warrant liabilities | - | - | - | (1,406,506 | ) | |||||||||||
| Income from investments held in Trust Account | 1,225,056 | 13,108 | 1,295,452 | 20,166 | ||||||||||||
| Interest earned on bank account | 2 | - | 16 | - | ||||||||||||
| Income (loss) before income tax | 9,971,847 | (10,685,172 | ) | 22,748,223 | (15,869,379 | ) | ||||||||||
| Income tax expense | 219,373 | - | 219,373 | - | ||||||||||||
| Net income (loss) | $ | 9,752,474 | $ | (10,685,172 | ) | $ | 22,528,850 | $ | (15,869,379 | ) | ||||||
| Weighted average shares outstanding of Class A common stock, basic and diluted | 86,250,000 | 86,250,000 | 86,250,000 | 67,665,746 | ||||||||||||
| Basic and diluted net income (loss) per share, Class A common stock | $ | 0.09 | $ | (0.10 | ) | $ | 0.21 | $ | (0.18 | ) | ||||||
| Weighted average shares outstanding of Class B common stock, basic and diluted | 21,562,500 | 21,562,500 | 21,562,500 | 20,956,492 | ||||||||||||
| Basic and diluted net income (loss) per share, Class B common stock | $ | 0.09 | $ | (0.10 | ) | $ | 0.21 | $ | (0.18 | ) | ||||||
The accompanying notes are an integral part of these condensed financial statements.
COMPUTE HEALTH ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
THREE AND SIX MONTHS ENDED JUNE 30, 2022
| Common Stock | Additional | Total | ||||||||||||||||||||||||||
| Class A | Class B | Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance - December 31, 2021 | - | $ | - | 21,562,500 | $ | 2,156 | $ | - | (61,518,209 | ) | $ | (61,516,053 | ) | |||||||||||||||
| Net income | - | - | - | - | - | 12,776,376 | 12,776,376 | |||||||||||||||||||||
| Balance - March 31, 2022 | - | $ | - | 21,562,500 | $ | 2,156 | $ | - | (48,741,833 | ) | $ | (48,739,677 | ) | |||||||||||||||
| Remeasurement of Class A common stock to redemption value | - | - | - | - | - | (725,192 | ) | (725,192 | ) | |||||||||||||||||||
| Net income | - | - | - | - | - | 9,752,474 | 9,752,474 | |||||||||||||||||||||
| Balance - June 30, 2022 | - | $ | - | 21,562,500 | $ | 2,156 | $ | - | $ | (39,714,551 | ) | $ | (39,712,395 | ) | ||||||||||||||
THREE AND SIX MONTHS ENDED JUNE 30, 2021
| Total | ||||||||||||||||||||||||||||
| Common Stock | Additional | Stockholders’ | ||||||||||||||||||||||||||
| Class A | Class B | Paid-In | Accumulated | Equity | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance - December 31, 2020 | - | $ | - | 21,562,500 | $ | 2,156 | $ | 22,844 | $ | (5,169 | ) | $ | 19,831 | |||||||||||||||
| Excess of cash received over fair value of the private placement warrants | - | - | - | - | 4,491,670 | - | 4,491,670 | |||||||||||||||||||||
| Remeasurement of Class A common stock to redemption amount | - | - | - | - | (4,514,514 | ) | (67,275,686 | ) | (71,790,200 | ) | ||||||||||||||||||
| Net loss | - | - | - | - | - | (5,184,207 | ) | (5,184,207 | ) | |||||||||||||||||||
| Balance - March 31, 2021 | - | $ | - | 21,562,500 | $ | 2,156 | $ | - | $ | (72,465,062 | ) | $ | (72,462,906 | ) | ||||||||||||||
| Net loss | - | - | - | - | - | (10,685,172 | ) | (10,685,172 | ) | |||||||||||||||||||
| Balance - June 30, 2021 | - | - | 21,562,500 | 2,156 | - | (83,150,234 | ) | (83,148,078 | ) | |||||||||||||||||||
The accompanying notes are an integral part of these condensed financial statements.
COMPUTE HEALTH ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
| For the Six Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) | $ | 22,528,850 | $ | (15,869,379 | ) | |||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Change in fair value of derivative warrant liabilities | (22,701,250 | ) | 13,195,740 | |||||
| Financing costs - derivative warrant liabilities | - | 1,406,506 | ||||||
| Change in fair value of promissory note – related party | (1,660 | ) | 145,180 | |||||
| Loss on promissory note – related party | - | 37,020 | ||||||
| Income from investments held in Trust Account | (1,295,452 | ) | (20,166 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | 304,070 | (1,126,472 | ) | |||||
| Accounts payable | 2,843 | 143,150 | ||||||
| Accrued expenses | (160,917 | ) | 152,130 | |||||
| Deferred legal fees | 514,108 | - | ||||||
| Income tax payable | 219,373 | - | ||||||
| Franchise tax payable | (180,045 | ) | 96,975 | |||||
| Net cash used in operating activities | (770,080 | ) | (1,839,316 | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Investment of cash in Trust Account | - | (862,500,000 | ) | |||||
| Net cash used in investing activities | - | (862,500,000 | ) | |||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from note payable to related party | - | 2,000 | ||||||
| Repayment of note payable to related party | - | (266,099 | ) | |||||
| Proceeds received from initial public offering, gross | - | 862,500,000 | ||||||
| Proceeds from private placement | - | 19,250,000 | ||||||
| Offering costs paid | - | (17,619,610 | ) | |||||
| Proceeds from promissory note to related party | - | 1,500,000 | ||||||
| Net cash provided by financing activities | - | 865,366,291 | ||||||
| Net change in cash | (770,080 | ) | 1,026,975 | |||||
| Cash - beginning of the period | 836,874 | 47,090 | ||||||
| Cash - end of the period | $ | 66,794 | $ | 1,074,065 | ||||
| Supplemental disclosure of noncash financing activities: | ||||||||
| Offering costs included in accrued expenses | $ | - | $ | 372,369 | ||||
| Offering costs paid by related party under promissory note | $ | - | $ | 94,099 | ||||
| Deferred underwriting commissions | $ | - | $ | 30,187,500 | ||||
| Reversal of offering costs included in accounts payable prior year | $ | - | $ | 113,386 | ||||
The accompanying notes are an integral part of these condensed financial statements.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1 —- Description of Organization, Business Operations and Liquidity
Compute Health Acquisition Corp. (the “Company” or “Compute Health”) is a blank check company incorporated in Delaware on October 7, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is an emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.
As of SeptemberJune 30, 2021,2022, the Company had not commenced any operations. All activity for the period from October 7, 2020 (inception) through SeptemberJune 30, 20212022 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”) described below, and, subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income on its investments held in the trust account from the proceeds of its Initial Public Offering. The Company has selected December 31 as itsCompany’s fiscal year end.end is December 31.
The Company’s sponsor is Compute Health Sponsor LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective on February 4, 2021. On February 9, 2021, the Company consummated its Initial Public Offering of 86,250,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”), including 11,250,000 additional Units to cover over-allotments (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of $862.5 million, and incurring offering costs of approximately $48.4 million, of which approximately $30.2 million was for deferred underwriting commissions (Note(see Note 6).
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 12,833,333 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), at a price of $1.50 per Private Placement Warrant to the Sponsor, generating proceeds of approximately $19.3 million (Note(see Note 4).
Upon the closing of the Initial Public Offering and the Private Placement, $862.5 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement were placed in a trust account (“Trust Account”) located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and invested only in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the net assets held in the Trust Account (net of amounts disbursed to management for working capital purposes, if permitted, and excluding the amount of any deferred underwriting discount) at the time of the agreement to enter into the initial Business Combination. However, the Company only intends to complete a Business Combination if the post-transaction company owns or acquires 50% or more of the issued and outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The Company will provide the holders of its Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then held in the Trust Account ($10.00 per Public Share). The per-share amount to be distributed to Public Stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 6). These Public Shares were recorded at a redemption value and classified as temporary equity in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”). If the Company seeks stockholder approval, the Company will proceed with a Business Combination if a majority of the shares voted are voted in favor of the Business Combination. The Company will not redeem the Public Shares in connection with a Business Combination in an amount that would cause its net tangible assets to be less than $5,000,001. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem the Public Shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each Public Stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction. If the Company seeks stockholder approval in connection with a Business Combination, the initial stockholders (as defined below) agreed to vote their Founder Shares (as defined below in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. In addition, the initial stockholders agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a Business Combination.
The Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), 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 holders of the Founder Shares (the “initial stockholders”) agreed not to propose an amendment to the Certificate of Incorporation (A) to modify the substance or timing of the Company’s obligation to allow redemption in connection with a Business Combination or to redeem 100% of the Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined below) or (B) with respect to any other provision relating to stockholders’ rights or pre-initial Business Combination activity, unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
If the Company is unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or February 9, 2023, (the “Combination Period”) and the Company’s stockholders have not amended the Certificate of Incorporation to extend such Combination Period, the Company will (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its 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 Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the board of directors, dissolve and liquidate, subject in in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The initial stockholders agreed to waive their rights to liquidating distributions from the Trust Account with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the initial stockholders acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters agreed to waive their rights to the deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within in the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $10.00. In order to protect the amounts held in the Trust Account, the Sponsor agreed to be liable to the Company if and to the extent any claims by a third party (except for the Company’s independent registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement (a “Target”), reduce the amount of funds in the Trust Account to below (i) $10.00 per Public Share or (ii) the lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of interest which may be withdrawn to pay taxes, provided that such liability will not apply to any claims by a third party or Target that executed a waiver of any and all rights to seek access to the Trust Account nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). 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 (other than the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Liquidity and Capital ResourcesGoing Concern
As of SeptemberJune 30, 2021,2022, the Company had approximately $959,000$67,000 in its operating bank accounts and a working capital of approximately $1.1 million$524,000 (not taking into account tax obligations of approximately $147,000$239,000 that may be paid using investment income earned in Trust Account). No amounts have been withdrawn from the Trust Account to pay taxes. In the three and six months ended June 30, 2022, $200,000 and $80,000 of franchise tax payments were made from the Company’s operating account and amounts have not been withdrawn from the Trust Account. No income tax payments have been made in the periods presented.
The Company’s liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the payment of $25,000 from the Sponsor to purchase Founder Shares (as defined in Note 5), and borrowings under a Note (as defined in Note 5) from the Sponsor of approximately $266,000. The Company repaid the Note in full upon consummation of the Initial Public Offering. Subsequent to the consummation of the Initial Public Offering, the Company’s liquidity has been satisfied through the net proceeds from the consummation of the Initial Public Offering and the Private Placement held outside of the Trust Account. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, provide the Company Working Capital Loans (as defined in Note 5). As of SeptemberJune 30, 20212022 and December 31, 2020,2021, a principal amount of $1.5 million wasis drawn under Working Capital Loans (see Note 5).
BasedWhile management does not believe the Company will need to raise additional funds in order to meet the expenditures required for operating the Company’s business, the Company’s Sponsor or an affiliate of the Company’s 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”). On April 6, 2021, the Company entered into a Loan Note Instrument (the “Loan Note” or “Promissory Note - related party”) with the Sponsor, pursuant to which, the Sponsor, in its sole and absolute discretion, may loan to us up to $1,500,000 for costs reasonably related to the consummation of an initial Business Combination. The Loan Note does not bear any interest. The Loan Note is payable on the foregoing,earliest to occur of (i) the date on which the Company consummate its initial Business Combination and (ii) the date that the winding up of the Company is effective. The Loan Note is subject to customary events if default, including failure by us to pay the principal amount due pursuant to the Loan Note within five business days of the Maturity Date and certain bankruptcy events of our Company.
At the Sponsor’s option, at any time prior to payment in full of the principal balance of the Loan Note, the Sponsor may elect to convert all or any portion of the unpaid principal balance of the Loan Note into that number of warrants, each whole warrant exercisable for one share of common stock of our Company (the “Conversion Warrants”), equal to: (x) the portion of the principal amount of the Loan Note being converted, divided by (y) $1.50, rounded up to the nearest whole number of warrants. The Conversion Warrants shall be identical to the warrants issued by us to the Sponsor in a private placement upon consummation of our initial public offering. The Conversion Warrants are subject to customary registration rights granted by us to the Sponsor pursuant to the Loan Note. As of June 30, 2022, $1.5 million was drawn under the Promissory Note - related party, presented at its fair value of approximately $1.4 million on the accompanying condensed balance sheets.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
On July 28, 2022, the Company entered into a second Loan Note Instrument (the “Second Loan Note”) with its Sponsor (“Payee”), pursuant to which, Payee, in its sole and absolute discretion, may loan to Compute Health up to $1.5 million for costs reasonably related to the Company’s consummation of an initial Business Combination. The Second Loan Note does not bear any interest. The Second Loan Note is payable on the earliest to occur of (i) the date on which Compute Health consummates its initial business combination and (ii) the date that the winding up of Compute Health is effective. On July 28, 2022, the Company borrowed $750,000 under the Second Loan Note. (See Note 11).
In connection with the Company’s assessment of going concern considerations in accordance with FASB’s ASC Topic 205-40, “Presentation of Financial Statements - Going Concern,” management believeshas determined that the mandatory liquidation and subsequent dissolution, should the Company be unable to complete a business combination, raises substantial doubt about the Company’s ability to continue as a going concern. The Company has until February 9, 2023 to consummate a Business Combination. It is uncertain that the Company will have sufficient working capital and borrowing capacitybe able to meet its needs through the earlier of the consummation ofconsummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution. No adjustments have been made to the carrying amounts of assets or one year from this filing. Over this time period,liabilities should the Company will be using the funds held outside of the Trust Account 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 businessrequired to merge with or acquire, and structuring, negotiating and consummating the Business Combination.liquidate after February 9, 2023.
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have an effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy are not determinable as of the date of these financial statements and the specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these financial statements.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 2 —- Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include normal recurring adjustments, necessary for the fair statement of the balances and results for the periods presented. Operating results for the three and ninesix months ended SeptemberJune 30, 2022 and 2021 are not necessarily indicative of the results that may be expected through December 31, 2021.2022.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the CurrentAnnual Report on Form 8-K and the final prospectus10-K filed by the Company with the SEC on February 16, 2021, and February 8, 2021, respectively.
March 31, 2022.
Restatement to Previously Reported Financial Statements
In April 2021, the Company identified an error in its accounting treatment for both its public and private warrants (Warrants) as presented in its audited balance sheet as of February 9, 2021 included in its Current Report on Form 8-K. The Warrants were reflected as a component of equity as opposed to liabilities on the balance sheet. Pursuant to Accounting Standards Codification (“ASC”) 250, Accounting Changes and Error Corrections issued by the Financial Accounting Standards Board (“FASB”) and Staff Accounting Bulletin 99, “Materiality”) (“SAB 99”) issued by the SEC, the Company determined the impact of the error was immaterial. The impact of the error correction is reflected in the unaudited condensed financial statements contained herein which resulted in a $39.5 million increase to the derivative warrant liabilities line item and offsetting decrease to the Class A common stock subject to possible redemption mezzanine equity line item. There would have been no change to total stockholders’ equity as reported. Transaction costs associated with warrant liabilities would be expensed as incurred.
In preparation of the Company’s unaudited condensed financial statements for the quarterly period ended September 30, 2021, the Company concluded it should restate its previously issued financial statements to classify all Class A common stock subject to possible redemption in temporary equity. In accordance with the SEC and its staff’s guidance on redeemable equity instruments in ASC 480-10-S99 originally issued on September 14, 2021 by the Office of the Chief Accountant and Division of Corporation Finance of the SEC and subsequently updated on November 10, 2021, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. The Company had previously classified a portion of its Class A common stock in permanent equity. Although the Company did not specify a maximum redemption threshold, its charter provides that currently, the Company will not redeem its public shares in an amount that would cause its net tangible assets to be less than $5,000,001. Previously, the Company did not consider redeemable stock classified as temporary equity as part of net tangible assets. Effective with these condensed financial statements, the Company restated this interpretation to include temporary equity in net tangible assets. As a result, the Company restated its previously filed financial statements to present all Class A common stock subject to possible redemption as temporary equity and to recognized accretion from the initial book value to redemption value at the time of its Initial Public Offering and the Over-Allotment. The Company’s previously filed financial statements that contained the error were reported in the Company’s Form 8-K filed with the SEC on February 16, 2021 (the “Post-IPO Balance Sheet”) and the Company’s Form 10-Qs for the quarterly periods ended March 31, 2021, and June 30, 2021 (the “Affected Quarterly Periods”).
The impact of the restatement to the Post-IPO Balance Sheet, including the correction to reflect the Warrants as liabilities, is presented below as in resulted in a reclassification of 3,421,390 Class A common stock from permanent equity to Class A common stock subject to possible redemption..
| As of February 9, 2021 | As Reported | Adjustment | As Restated | |||||||||
| Total assets | $ | 864,232,091 | $ | 864,232,091 | ||||||||
| Derivative warrant liabilities - public warrants | - | 24,753,640 | 24,753,640 | |||||||||
| Derivative warrant liabilities - private warrants | - | 14,758,330 | 14,758,330 | |||||||||
| Total liabilities | $ | 30,945,988 | $ | 39,511,970 | $ | 70,457,958 | ||||||
| Class A common stock subject to possible redemption | 828,286,100 | 34,213,900 | 862,500,000 | |||||||||
| Preferred stock | - | - | - | |||||||||
| Class A common stock | 342 | (342 | ) | - | ||||||||
| Class B common stock | 2,156 | - | 2,156 | |||||||||
| Additional paid-in capital | 5,102,015 | (5,102,015 | ) | - | ||||||||
| Accumulated deficit | (104,510 | ) | (68,623,513 | ) | (68,728,023 | ) | ||||||
| Total stockholders’ equity (deficit) | $ | 5,000,003 | $ | (73,725,870 | ) | $ | (68,725,867 | ) | ||||
| Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Equity (Deficit) | $ | 864,232,091 | $ | - | $ | 864,232,091 | ||||||
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The impact of the restatement on the financial statements for the Affected Quarterly Periods is presented below.
The table below presents the effect of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported balance sheet as of March 31, 2021:
| As of March 31, 2021 | As Reported | Adjustment | As Restated | |||||||||
| Total assets | $ | 863,892,591 | $ | 863,892,591 | ||||||||
| Total liabilities | $ | 73,855,497 | $ | 73,855,497 | ||||||||
| Class A common stock subject to possible redemption | 785,037,090 | 77,462,910 | 862,500,000 | |||||||||
| Preferred stock | - | - | - | |||||||||
| Class A common stock | 775 | (775 | ) | - | ||||||||
| Class B common stock | 2,156 | - | 2,156 | |||||||||
| Additional paid-in capital | 10,186,449 | (10,186,449 | ) | - | ||||||||
| Accumulated deficit | (5,189,376 | ) | (67,275,686 | ) | (72,465,062 | ) | ||||||
| Total stockholders’ equity (deficit) | $ | 5,000,004 | $ | (77,462,910 | ) | $ | (72,462,906 | ) | ||||
| Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Equity (Deficit) | $ | 863,892,591 | $ | - | $ | 863,892,591 | ||||||
The table below presents the effect of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported statement of cash flows for the three months ended March 31, 2021:
| Form 10-Q: Three Months Ended March 31, 2021 | ||||||||||||
| As Reported | Adjustment | As Restated | ||||||||||
| Cash Flow from Operating Activities | $ | (1,595,099 | ) | $ | - | $ | (1,595,099 | ) | ||||
| Cash Flows from Investing Activities | $ | (862,500,000 | ) | $ | - | $ | (862,500,000 | ) | ||||
| Cash Flows from Financing Activities | $ | 864,116,292 | $ | - | $ | 864,116,292 | ||||||
| Supplemental Disclosure of Noncash Financing Activities: | ||||||||||||
| Offering costs included in accounts payable | $ | 250,000 | $ | - | $ | 250,000 | ||||||
| Offering costs included in accrued expenses | $ | 372,369 | $ | - | $ | 372,369 | ||||||
| Offering costs paid by related party under promissory note | $ | 94,099 | $ | - | $ | 94,099 | ||||||
| Deferred underwriting commissions | $ | 30,187,500 | $ | - | $ | 30,187,500 | ||||||
| Reversal of offering costs included in accounts payable in prior year | $ | 113,386 | $ | - | $ | 113,386 | ||||||
| Derivative warrant liabilities in connection with initial public offering and private placement | $ | (39,511,970 | ) | $ | - | $ | (39,511,970 | ) | ||||
| Initial value of common stock subject to possible redemption | $ | 788,774,130 | $ | (788,774,130 | ) | $ | - | |||||
| Change in value of common stock subject to possible redemption | $ | (3,737,040 | ) | $ | 3,737,040 | $ | - | |||||
The table below presents the effect of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported balance sheet as of June 30, 2021:
| As of June 30, 2021 | As Reported | Adjustment | As Restated | |||||||||
| Total assets | $ | 864,720,703 | $ | 864,720,703 | ||||||||
| Total liabilities | $ | 85,368,782 | $ | 85,368,782 | ||||||||
| Class A common stock subject to possible redemption | 774,351,920 | 88,148,080 | 862,500,000 | |||||||||
| Preferred stock | - | - | - | |||||||||
| Class A common stock | 881 | (881 | ) | - | ||||||||
| Class B common stock | 2,156 | - | 2,156 | |||||||||
| Additional paid-in capital | 20,871,512 | (20,871,512 | ) | - | ||||||||
| Accumulated deficit | (15,874,548 | ) | (67,275,687 | ) | (83,150,235 | ) | ||||||
| Total stockholders’ equity (deficit) | $ | 5,000,001 | $ | (88,148,080 | ) | $ | (83,148,079 | ) | ||||
| Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Equity (Deficit) | $ | 864,720,703 | $ | - | $ | 864,720,703 | ||||||
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The table below presents the effect of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported statement of cash flows for the six months ended June 30, 2021:
| Form 10-Q: Six Months Ended June 30, 2021 | ||||||||||||
| As Reported | Adjustment | As Restated | ||||||||||
| Cash Flow from Operating Activities | $ | (1,839,316 | ) | $ | - | $ | (1,839,316 | ) | ||||
| Cash Flows from Investing Activities | $ | (862,500,000 | ) | $ | - | $ | (862,500,000 | ) | ||||
| Cash Flows from Financing Activities | $ | 865,366,291 | $ | - | $ | 865,366,291 | ||||||
| Supplemental Disclosure of Noncash Financing Activities: | ||||||||||||
| Offering costs included in accrued expenses | $ | 372,369 | $ | - | $ | 372,369 | ||||||
| Offering costs paid by related party under promissory note | $ | 94,099 | $ | - | $ | 94,099 | ||||||
| Deferred underwriting commissions | $ | 30,187,500 | $ | - | $ | 30,187,500 | ||||||
| Reversal of offering costs included in accounts payable in prior year | $ | 113,386 | $ | - | $ | 113,386 | ||||||
| Derivative warrant liabilities in connection with initial public offering and private placement | $ | (39,511,970 | ) | $ | - | $ | (39,511,970 | ) | ||||
| Initial value of common stock subject to possible redemption | $ | 788,774,130 | $ | (788,774,130 | ) | $ | - | |||||
| Change in value of common stock subject to possible redemption | $ | (14,422,209 | ) | $ | 14,422,209 | $ | - | |||||
The table below presents the effect of the financial statement adjustments related to the restatement discussed above to the Company’s previously reported statements of stockholders’ equity as of March 31 and June 30, 2021:
| Statement of Stockholders’ Equity as of March 31, 2021 (unaudited) | As Reported | Adjustment | As Restated | |||||||||
| Sale of units in initial public offering, gross | $ | 862,500,000 | $ | (862,500,000 | ) | $ | - | |||||
| Offering costs | $ | (47,036,560 | ) | $ | 47,036,560 | $ | - | |||||
| Sale of private placement warrants to Sponsor in private placement | $ | 19,250,000 | $ | (19,250,000 | ) | $ | - | |||||
| Fair value of derivative warrant liabilities issued in initial public offering and private placement | $ | (39,511,970 | ) | $ | 39,511,970 | $ | - | |||||
| Common stock subject to possible redemption | $ | (785,037,090 | ) | $ | 785,037,090 | $ | - | |||||
| Excess of cash received over fair value of the private placement warrants | $ | 4,491,670 | $ | 4,491,670 | ||||||||
| Accretion of Class A common stock to redemption amount | $ | - | $ | (71,790,200 | ) | $ | (71,790,200 | ) | ||||
| Total stockholders’ equity (deficit) | $ | 5,000,004 | $ | (77,462,910 | ) | $ | (72,462,906 | ) | ||||
| Statement of Stockholders’ Equity as of June 30, 2021 (unaudited) | As Reported | Adjustment | As Restated | |||||||||
| Common stock subject to possible redemption | $ | 10,685,169 | $ | (10,685,169 | ) | $ | - | |||||
| Total stockholders’ equity (deficit) | $ | 5,000,001 | $ | (88,148,079 | ) | $ | (83,148,078 | ) | ||||
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
In connection with the change in presentation for the Class A common stock subject to possible redemption, the Company has restated its earnings per share calculation to allocate income and losses shared pro rata between the two classes of shares. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of shares participate pro rata in the income and losses of the Company. The impact to the reported amounts of weighted average shares outstanding and basic and diluted earnings per share is presented below for the Affected Quarterly Periods:
| EPS for Class A common stock (redeemable) | ||||||||||||
| As Reported | Adjustment | As Restated | ||||||||||
| Form 10-Q (March 31, 2021) - three months ended March 31, 2021 | ||||||||||||
| Net loss | $ | (5,184,207 | ) | $ | - | $ | (5,184,207 | ) | ||||
| Weighted average shares outstanding | 78,870,085 | (29,995,085 | ) | 48,875,000 | ||||||||
| Basic and diluted earnings per share | $ | - | $ | (0.07 | ) | $ | (0.07 | ) | ||||
| Form 10-Q (June 30, 2021) - three months ended June 30, 2021 | ||||||||||||
| Net loss | $ | (10,685,172 | ) | $ | - | $ | (10,685,172 | ) | ||||
| Weighted average shares outstanding | 78,491,967 | 7,758,033 | 86,250,000 | |||||||||
| Basic and diluted earnings per share | $ | - | $ | (0.10 | ) | $ | (0.10 | ) | ||||
| Form 10-Q (June 30, 2021) - six months ended June 30, 2021 | ||||||||||||
| Net loss | $ | (15,869,379 | ) | $ | - | $ | (15,869,379 | ) | ||||
| Weighted average shares outstanding | 78,627,770 | (10,962,024 | ) | 67,665,746 | ||||||||
| Basic and diluted earnings per share | $ | - | $ | (0.18 | ) | $ | (0.18 | ) | ||||
| EPS for Class B common stock (non-redeemable) | ||||||||||||
| As Reported | Adjustment | As Restated | ||||||||||
| Form 10-Q (March 31, 2021) - three months ended March 31, 2021 | ||||||||||||
| Net loss | $ | (5,184,207 | ) | $ | - | $ | (5,184,207 | ) | ||||
| Weighted average shares outstanding | 24,525,702 | (4,181,952 | ) | 20,343,750 | ||||||||
| Basic and diluted earnings per share | $ | (0.21 | ) | $ | 0.14 | $ | (0.07 | ) | ||||
| Form 10-Q (June 30, 2021) - three months ended June 30, 2021 | ||||||||||||
| Net loss | $ | (10,685,172 | ) | $ | - | $ | (10,685,172 | ) | ||||
| Weighted average shares outstanding | 29,320,533 | (7,758,033 | ) | 21,562,500 | ||||||||
| Basic and diluted earnings per share | $ | (0.36 | ) | $ | 0.26 | $ | (0.10 | ) | ||||
| Form 10-Q (June 30, 2021) - six months ended June 30, 2021 | ||||||||||||
| Net loss | $ | (15,869,379 | ) | $ | - | $ | (15,869,379 | ) | ||||
| Weighted average shares outstanding | 26,936,363 | (5,979,871 | ) | 20,956,492 | ||||||||
| Basic and diluted earnings per share | $ | (0.59 | ) | $ | 0.41 | $ | (0.18 | ) | ||||
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s unaudited condensed financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Corporation coverage limit of $250,000, and any cash held in the Trust Account. As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the Company had not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Use of Estimates
The preparation of unaudited condensed financial statements in conformity with 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 unaudited condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed 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 had approximately $905,000$14,000 and $792,000 in cash equivalents held outside the Trust Account as of SeptemberJune 30, 2021. The Company had no cash equivalents as of2022 and December 31, 2020.2021, respectively.
Investments Held in Trust Account
The Company’s portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When the Company’s investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds 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 is included in income from investments held in Trust Account in the accompanying unaudited condensed statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC Topic 820, “Fair Value Measurements,” equal or approximate the carrying amounts represented in the condensed balance sheetsheets due to their short-term nature.
The Company has elected the fair value option to account for its Promissory Note – related party with its Sponsor as defined and more fully described in Note 4. As a result of applying the fair value option, the Company records each draw at fair value with a gain or loss recognized at issuance, and subsequent changes in fair value are recorded as change in the fair value of Promissory Note – related party on the condensed statement of operations. The fair value is based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s and, if applicable, an independent third-party valuation firm’s own assumption about the assumptions a market participant would use in pricing the asset or liability.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. U.S. 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 consist of:
| ● | Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
Derivative Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The warrants issued in connection with the Initial Public Offering (the “Public Warrants”) and the Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statementcondensed statements of operations. The fair value of the Public Warrants issued in connection with the Public Offering and Private Placement Warrants were initially measured at fair value using a Monte Carlo simulation model and subsequently, the fair value of the Private Placement Warrants have been estimated using a Monte Carlo simulation model each measurement date. The fair value of Public Warrants issued in connection with the Initial Public Offering have subsequently been measured based on the listed market price of such warrants. As the transfer of Private Placement Warrants to anyone who is not a permitted transferee would result in the Private Placement Warrants having substantially the same terms as the Public Warrants, the Company determined that the fair value of each Private Placement Warrant is equivalent to that of each Public Warrant. The fair value of the Warrants as of SeptemberJune 30, 2022 and December 31, 2021, is based on observable listed prices for such warrants. The determination of the fair value of the warrant liability may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Promissory Note - Related Party
The Company has elected the fair value option to account for its Promissory Note - related party with its Sponsor as defined and more fully described in Note 5. As a result of applying the fair value option, the Company records each draw at fair value with a gain or loss recognized at issuance, and subsequent changes in fair value are recorded as change in the fair value of its Promissory Note - related party on the condensed statements of operations. The fair value is based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s and, if applicable, an independent third-party valuation firm’s own assumption about the assumptions a market participant would use in pricing the asset or liability.
Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities are expensed as incurred and presented as non-operating expenses on the unaudited condensed statementstatements of operations. Offering costs associated with the Class A common stock are charged against their carrying value upon the completion of the Initial Public Offering. The Company classifies deferred underwriting commissions are non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.”
Conditionally redeemable Class A common stock (including Class A common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, Class A common stock is classified as stockholders’ equity. The Company’s Class A common stock feature contains certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, Class A common stock subject to possible redemption is classified as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheet.sheets. Accordingly, as of SeptemberJune 30, 2022 and December 31, 2021, 86,250,000 shares of Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ deficit section of the Company’s condensed balance sheet.sheets.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the Class A common stock subject to possible redemption to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security. Effective with the closing of the Initial Public Offering, the Company recognized the accretionremeasurement from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit. Subsequent changes in redemption value are recognized and presented as remeasurement of Class A common stock to redemption value on the accompanying statement of changes in stockholders’ equity (deficit).
Income Taxes
The Company’s taxable income primarily consists of interest income on the Trust Account. The Company’s general and administrative expenses are generally considered start-up costs and are not currently deductible. For the three and nine months ended September 30, 2021, income tax expense for the period was deemed to be immaterial.
The Company follows the asset and liability method of accounting for income taxes under FASB ASC Topic 740, “Income Taxes” (“ASC 740”). 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. AsDuring the three and six months ended, as a result of Septemberthe increase in interest earned on the Trust Account and the Company’s projection to have taxable income for the year, the Company’s deferred tax assets and related valuation allowance related to its net operating losses of approximately $32,000 were reversed and the net operating losses have been carried forward to reduce the Company’s income tax expense. At June 30, 2022 and December 31, 2021, the Company had deferred tax assets of approximately $324,000 withmaintains a full valuation allowance against them. Deferredon its deferred tax assets were deemed immaterial asassets. The Company’s effective tax rate was 2.20% and 0.96% for the three and six months ended June 30, 2022, respectively. The effective tax rate for the three and six months ended June 30, 2021 was 0%. The effective tax rate differs from the statutory rate of December 31, 2020.21%, primarily due to the changes in the fair value of warrant liabilities and the valuation allowance on deferred tax assets. There was no taxable income in the three and six months ended June 30, 2021.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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. There were no unrecognized tax benefits as end of quarter September 30, 2021. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties as end of the nine months ended September 30, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
Net Income (Loss) Per Share of Common Stock
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net income per common share is calculated by dividing the net income by the weighted average shares of common stock outstanding for the respective period.
The calculation of diluted net income (loss) per common stock does not consider the effect of the warrants issued in connection with the Initial Public Offering (including exercise of the over-allotment option) and the Private Placement to purchase an aggregate of 34,395,833 shares of common stock in the calculation of diluted income per share, because their exercise is contingent upon future eventsevents.
The calculation of diluted net income (loss) per common stock for the three and their inclusionsix months ended June 30, 2021 does not consider the effects of the Class B founder shares no longer subject to forfeiture and as the contingency resolved at the beginning of the period would be anti-dilutive under the treasury stock method. As a result, diluted net income per share is the same as basic net income per share for the three and nine months ended September 30, 2021. AccretionRemeasurement associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The following table reflects presents a reconciliation of the numerator and denominator used to compute basic and diluted net income (loss) per share for each class of common stock:
| For the Three Months Ended September 30, 2021 | For the Nine Months Ended September 30, 2021 | |||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Basic and diluted net income per common stock: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net income | $ | 15,347,677 | $ | 3,836,919 | $ | 2,577,464 | $ | 737,753 | ||||||||
| Denominator: | ||||||||||||||||
| Basic and diluted weighted average common stock outstanding | 86,250,000 | 21,562,500 | 73,928,571 | 21,160,714 | ||||||||||||
| Basic and diluted net income per common stock | $ | 0.18 | $ | 0.18 | $ | 0.03 | $ | 0.03 | ||||||||
| For the Three Months Ended June 30, 2022 | For the Three Months Ended June 30, 2021 | |||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Basic and diluted net income (loss) per common stock: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net income (loss) available to stockholders | $ | 7,801,979 | $ | 1,950,495 | $ | (8,548,138 | ) | $ | (2,137,034 | ) | ||||||
| Denominator: | ||||||||||||||||
| Basic and Diluted weighted average shares outstanding | 86,250,000 | 21,562,500 | 86,250,000 | 21,562,500 | ||||||||||||
| Basic and Diluted net income (loss) per common stock | $ | 0.09 | $ | 0.09 | $ | (0.10 | ) | $ | (0.10 | ) | ||||||
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
| For the Six Months Ended June 30, 2022 | For the Six Months Ended June 2021 | |||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Basic and Diluted net income (loss) per common stock: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net income (loss) available to stockholders | $ | 18,023,080 | $ | 4,505,770 | $ | (12,116,748 | ) | $ | (3,752,631 | ) | ||||||
| Denominator: | ||||||||||||||||
| Basic and Diluted weighted average shares outstanding | 86,250,000 | 21,562,500 | 67,665,746 | 20,956,492 | ||||||||||||
| Basic and Diluted net income (loss) per common stock | $ | 0.21 | $ | 0.21 | $ | (0.18 | ) | $ | (0.18 | ) | ||||||
Recent Accounting Pronouncements
In August 2020,June 2022, the FASB issued Accounting Standard Update (ASU) No. 2020-06, Debt—Debt with Conversion and Other Options (ASU 2022-03, ASC Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own820 “Fair Value Measurement of Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP.Securities Subject to Contractual Sale Restrictions”. The ASU removes certain settlement conditionsamends ASC 820 to clarify that a contractual sales restriction is not considered in measuring an equity security at fair value and to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are required formeasured at fair value. The ASU applies to both holders and issuers of equity contracts to qualifyand equity-linked securities measured at fair value. The amendments in this ASU are effective for the derivative scope exception,Company in fiscal years beginning after December 15, 2023, and it also simplifiesinterim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company is considering the diluted earnings per share calculation in certain areas. As permitted byimpact of this pronouncement on the standard, the Company has elected to early adopt this standard in its first quarter of 2021 with no impact upon adoption.financial statements.
The Company’s management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying unaudited condensed financial statements.
Note 3 —- Initial Public Offering
On February 9, 2021, the Company consummated its Initial Public Offering of 86,250,000 Units, including 11,250,000 Over-Allotment Units, at $10.00 per Unit, generating gross proceeds of $862.5 million, and incurring offering costs of approximately $48.4 million, of which approximately $30.2 million was for deferred underwriting commissions.
Each Unit consists of one share of Class A common stock, and one-quarter of one redeemable warrant (each, a “Public Warrant”). Each Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7).
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 4 —- Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of 12,833,333 Private Placement Warrants, at a price of $1.50 per Private Placement Warrant to the Sponsor, generating proceeds of approximately $19.3 million.
Each Private Placement Warrant is exercisable for one whole share of Class A common stock at a price of $11.50 per common share. A portion of the proceeds from the sale of the Private Placement Warrants to the Sponsor was added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable (except as described below in Note 7 under “Warrants —- Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00”) so long as they are held by the initial purchasers or their permitted transferees.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The purchasers of the Private Placement Warrants agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants (except to permitted transferees) until 30 days after the completion of the initial Business Combination.
Note 5 —- Related Party Transactions
Founder Shares
On October 16, 2020, the Sponsor purchased 21,562,500 shares of the Company’s Class B common stock, par value $0.0001 per share, (the “Founder Shares”) for an aggregate price of $25,000. The Sponsor agreed to forfeit up to 2,812,500 Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriters, so that the Founder Shares would represent 20.0% of the Company’s issued and outstanding shares after the Initial Public Offering. The underwriter exercised its over-allotment option in full on February 9, 2021; thus, these 2,812,500 Founder Shares are no longer subject to forfeiture.
The initial stockholders 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 the initial Business Combination and (B) subsequent to the initial Business Combination, (x) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Related Party Loans
On October 16, 2020, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Note”). This loan was non-interest bearing and payable upon the closing of the Initial Public Offering. The Company borrowed approximately $266,000 under the Note and repaid the Note in full upon consummation of the Initial Public Offering.
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). On April 6, 2021, the Company entered into a Loan Note Instrument (the “Loan Note” or “Promissory Note –- related party”) with the Sponsor, pursuant to which, the Sponsor, in its sole and absolute discretion, may loan to the Company up to $1,500,000$1.5 million for costs reasonably related to the Company’s consummation of an initial business combination.Business Combination. The Loan Note does not bear any interest. The Loan Note is payable on the earliest to occur of (i) the date on which the Company consummates its initial business combinationBusiness Combination and (ii) the date that the winding up of the Company is effective. The Loan Note is subject to customary events if default, including failure by the Company to pay the principal amount due pursuant to the Loan Note within five business days of the Maturity Date and certain bankruptcy events of the Company.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
At the Sponsor’s option, at any time prior to payment in full of the principal balance of the Loan Note, the Sponsor may elect to convert all or any portion of the unpaid principal balance of the Loan Note into that number of warrants, each whole warrant exercisable for one share of common stock of the Company (the “Conversion Warrants”), equal to: (x) the portion of the principal amount of the Loan Note being converted, divided by (y) $1.50, rounded up to the nearest whole number of warrants. The Conversion Warrants shall be identical to the warrants issued by the Company to the Sponsor in a private placement upon consummation of the Company’s initial public offering. The Conversion Warrants are subject to customary registration rights granted by the Company to the Sponsor pursuant to the Loan Note. As of SeptemberJune 30, 2022 and December 31, 2021, $1.5 million was drawn on the Promissory Note –- related party, presented at its fair value of $1.4 million on the accompanying unaudited condensed balance sheets. There were no Working Capital Loans outstanding as of December 31, 2020.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 6 —- Commitments and Contingencies
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans), were entitled to registration rights pursuant to a registration rights agreement signed upon the consummation of the Initial Public Offering. These holders were entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provided that the Company would not be required to effect or permit any registration or cause any registration statement to become effective until termination of the applicable lock-up period. 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 Initial Public Offering to purchase up to 11,250,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. The underwriter exercised its over-allotment option in full on February 9, 2021.
The underwriters were entitled to an underwriting discount of $0.20 per Unit, or approximately $17.3 million in the aggregate, paid upon the closing of the Initial Public Offering. An additional fee of $0.35 per Unit, or approximately $30.2 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 the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Administrative Services Agreement
Commencing on the date that the Company’s securities were first listed on the NYSE through the earlier of consummation of the initial Business Combination and the liquidation, the Company agreed to pay the Sponsor a total of $10,000 per month for administrative and support services. The Sponsor has waived these fees through SeptemberJune 30, 2021.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 7 — Warrants2022.
Deferred Legal Fees
The Company has an agreement to obtain legal advisory services pursuant to which the Company’s legal counsel has agreed to defer their fees until the closing of the Business Combination. The deferred fees will become payable to the legal counsel in the event the Company completes a Business Combination. As of SeptemberJune 30, 2022 and December 31, 2021, the amount of these fees is approximately $1.5 million and $1.0 million, respectively, and is included as deferred legal fees on the accompanying condensed balance sheets.
Note 7 - Warrants
As of June 30, 2022 and December 31, 2021, the Company had 21,562,500 Public Warrants and 12,833,333 Private Warrants outstanding.
Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the warrants and a current prospectus relating to them is available and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder (or holders are permitted to exercise their warrants on a cashless basis under certain circumstances as a result of (i) the Company’s failure to have an effective registration statement by the 60th business day after the closing of the initial Business Combination or (ii) a notice of redemption described under “Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00”). The Company agreed that as soon as practicable, but in no event later than 20 business days after the closing of its initial Business Combination, the Company will use its commercially reasonable efforts to file with the SEC and have an effective registration statement covering the shares of Class A common stock issuable upon exercise of the warrants and will use its commercially reasonable efforts to cause the same to become effective within 60 business days after the closing of the Company’s initial Business Combination and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed. If the shares issuable upon exercise of the warrants are not registered under the Securities Act in accordance with the above requirements, the Company will be required to permit holders to exercise their warrants on a cashless basis. However, 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 the exercising holder, or an exemption from registration is available. Notwithstanding the above, if the Company’s shares of Class A common stock are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy 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, it will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, it 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.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The warrants have an exercise price of $11.50 per share, subject to adjustments, and will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation. In addition, if (x) the Company issues additional shares or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price of less than $9.20 per share (with such issue price or effective issue price to be determined in good faith by the board of directors, and in the case of any such issuance to the initial stockholders or their affiliates, without taking into account any Founder Shares held by them prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the shares of Class A common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of each warrant will be adjusted (to the nearest cent) such that the effective exercise price per full share will be equal to 115% of the higher of (i) the Market Value and (ii) the Newly Issued Price, and the $18.00 per-share redemption trigger price described under “Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00” will be adjusted (to the nearest cent) to be equal to 180% of the higher of (i) the Market Value and (ii) the Newly Issued Price, and the $10.00 per-share redemption trigger price described under “Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00” will be adjusted (to the nearest cent) to be equal to the higher of (i) the Market Value and (ii) the Newly Issued Price.
The Private Placement Warrants are identical to the Public Warrants, except that, so long as they are held by the Sponsor or its permitted transferees, (i) they will not be redeemable by the Company, (ii) they (including the shares of Class A common stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by the Sponsor until 30 days after the completion of the initial Business Combination, (iii) they may be exercised by the holders on a cashless basis and (iv) are subject to registration rights.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00:
Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described herein with respect to the Private Placement Warrants):
| ● | in whole and not in part; |
| ● | at a price of $0.01 per warrant; |
| ● | upon a minimum of 30 days’ prior written notice of redemption; and |
| ● | if, and only if, the last reported sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders. |
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The Company will not redeem the warrants as described above unless an effective registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the warrants is effective and a current prospectus relating to those shares of Class A common stock is available throughout the 30-day redemption period. Any such exercise would not be on a cashless basis and would require the exercising warrant holder to pay the exercise price for each warrant being exercised.
Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00:
Commencing ninety days after the warrants become exercisable, the Company may redeem the outstanding warrants:
| ● | in whole and not in part; |
| ● | at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares of Class A common stock determined by reference to an agreed table based on the redemption date and the fair market value of the Class A common stock; |
| ● | if, and only if, the last reported sale price of Class A common stock equals or exceeds $10.00 per share on the trading day prior to the date on which the Company sends the notice of redemption to the warrant holders; |
| ● | 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 common stock) as the outstanding Public Warrants, as described above; and |
| ● | if, and only if, there is an effective registration statement covering the issuance of the shares of Class A common stock (or a security other than the Class A common stock into which the Class A common stock has been converted or exchanged for in the event the Company is not the surviving company in the initial Business Combination) issuable upon exercise of the warrants and a current prospectus relating thereto available throughout the 30-day period after written notice of redemption is given. |
The fair market value of Class A common stock mentioned above shall mean the volume-weighted average price of Class A common stock for the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of warrants. In no event will the warrants be exercisable in connection with this redemption feature for more than 0.361 shares of Class A common stock per warrant (subject to adjustment).
In no event will the Company be required to net cash settle any warrant. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 8 —- Class A Common Stock Subject to Possible Redemption
The Company’s Class A common stock feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of future events. The Company is authorized to issue 300,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of the Company’s Class A common stock are entitled to one vote for each share. As of SeptemberJune 30, 2022 and December 31, 2021, there were 86,250,000 shares of Class A common stock outstanding, all of which were subject to possible redemption and are classified outside of permanent equity in the unaudited condensed balance sheet. As of December 31, 2020, there were no shares of Class A common stock issued or outstanding.sheets.
The Class A common stock subject to possible redemption reflected on the unaudited condensed balance sheetsheets is reconciled on the following table:
| Gross proceeds | $ | 862,500,000 | $ | 862,500,000 | ||||
| Less: | ||||||||
| Proceeds allocated to Public Warrants | (24,753,640 | ) | (24,753,640 | ) | ||||
| Class A common stock issuance costs | (47,036,560 | ) | (47,036,560 | ) | ||||
| Plus: | ||||||||
| Accretion of carrying value to redemption value | 71,790,200 | |||||||
| Remeasurement of carrying value to redemption value | 71,790,200 | |||||||
| Class A common stock subject to possible redemption | $ | 862,500,000 | $ | 862,500,000 | ||||
| Remeasurement of carrying value to redemption value | 725,192 | |||||||
| Class A common stock subject to possible redemption at June 30, 2022 | $ | 863,225,192 | ||||||
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 9 —- Stockholders’ Equity (Deficit)Deficit
Preferred Stock —- The Company is authorized to issue 3,000,000 shares of preferred stock, par value $0.0001 per share, with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of SeptemberJune 30, 2021,2022 and December 31, 2020,2021, there were no shares of preferred stock issued or outstanding.
Class A Common Stock —- The Company is authorized to issue 300,000,000 shares of Class A common stock with a par value of $0.0001 per share. As of SeptemberJune 30, 2021,2022 and December 31, 2020,2021, there were 86,250,000 shares of Class A common stock issued or outstanding, all of which are subject to possible redemption and have been classified as temporary equity (seeequity. See Note 8).8.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Class B Common Stock —- The Company is authorized to issue 30,000,000 shares of Class B common stock with a par value of $0.0001 per share. As of SeptemberJune 30, 2021,2022 and December 31, 2020,2021, there were 21,562,500 shares of Class B common stock issued and outstanding.
Prior to the initial Business Combination, only holders of Class B common stock will have the right to vote on the election of directors. Holders of the Class A common stock will not be entitled to vote on the election of directors during such time. In addition, prior to the initial Business Combination, holders of a majority of the outstanding shares of Class B common stock may remove a member of the board of directors for any reason. These provisions of the certificate of incorporation may only be amended by a resolution passed by the holders of a majority of shares of the Class B common stock. With respect to any other matter submitted to a vote of the stockholders, including any vote in connection with the initial Business Combination, except as required by applicable law or stock exchange rule, holders of the Class A common stock and holders of the Class B common stock will vote together as a single class, with each share entitling the holder to one vote.
The Class B common stock will automatically convert into Class A common stock at the time of the initial Business Combination, or earlier at the option of the holder, on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment as described herein. In the case that additional shares of Class A common stock, 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 the initial Business Combination, including pursuant to a specified future issuance, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the then-outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance, including pursuant to a specified future issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the initial Business Combination (net of the number of shares of Class A common stock redeemed in connection with the initial Business Combination and excluding any shares or equity-linked securities issued or issuable to any seller in the initial Business Combination).
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 10 —- Fair Value Measurements
The following tables presents information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of SeptemberJune 30, 2022 and December 31, 2021, by level within the fair value hierarchy:
June 30, 2022
| Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
| Assets: | ||||||||||||
| Investments held in Trust Account - Money Market Fund | $ | 863,845,224 | $ | - | $ | - | ||||||
| Liabilities: | ||||||||||||
| Derivative warrant liabilities - public warrants | $ | 4,743,750 | $ | - | $ | - | ||||||
| Derivative warrant liabilities - private warrants | $ | - | $ | 2,823,330 | $ | - | ||||||
| Promissory note - related party | $ | - | $ | - | $ | 1,391,290 | ||||||
December 31, 2021
| Quoted Prices in Active Markets | Significant Other Observable Inputs | Significant Other Unobservable Inputs | ||||||||||||||||||||||
| Description | (Level 1) | (Level 2) | (Level 3) | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | ||||||||||||||||||
| Assets: | ||||||||||||||||||||||||
| Investments held in Trust Account - US Treasury securities | $ | 862,533,417 | $ | - | $ | - | ||||||||||||||||||
| Investments held in Trust Account - Money Market Fund | $ | 862,549,773 | $ | - | $ | - | ||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||
| Derivative warrant liabilities - public warrants | $ | 20,915,630 | $ | - | $ | - | $ | 18,975,000 | $ | - | $ | - | ||||||||||||
| Derivative warrant liabilities - private warrants | $ | - | $ | 12,448,330 | $ | - | $ | - | $ | 11,293,330 | $ | - | ||||||||||||
| Promissory note – related party | $ | - | $ | - | $ | 1,384,970 | ||||||||||||||||||
| Promissory note - related party | $ | - | $ | - | $ | 1,392,950 | ||||||||||||||||||
Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. The estimated fair value of the Public Warrants transferred from a Level 3 fair value measurement to a Level 1 fair value measurement, when the Public Warrants were separately listed and traded in March 2021. The estimated fair value of the Private Placement Warrants was transferred from a Level 3 measurement to a Level 2 fair value measurement in July 2021.2021.There were no transfers to/from Levels 1, 2, and 3 during the three and six months ended June 30, 2022.
Level 1 instruments include investments in mutual funds invested in government securities. The Company uses inputs such as actual trade data, benchmark yields, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.
Level 2 instruments include Private Placement Warrants. The Company uses the same quoted market prices from dealers or brokers, and other similar sources as the Public Warrants to determine thetheir fair value of its investments.value.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The fair value of the Public Warrants as of SeptemberJune 30, 2022 and December 31, 2021, was measured utilizing the Level 1 input of the observable listed trading price for such warrants.
Level 3 instruments are comprised of the Working Capital Loan measured at fair value using a Monte Carlo simulation model. The estimated fair value of the Working Capital Loan is determined using Level 3 inputs. Inherent in a Monte Carlo simulation model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock warrants based on implied volatility from the Company’s traded warrants and from historical volatility of select peer company’s common stock that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.
COMPUTE HEALTH ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The following table provides quantitative information regarding Level 3 fair value measurements inputs used by the estimated fair value of warrants that may be issued upon conversion of the promissory note – related party at their measurement dates:
| April 13, 2021 | June 7, 2021 | September 30, 2021 | ||||||||||
| Volatility | 63.6 | % | 64.6 | % | 66.1 | % | ||||||
| Stock price | $ | 1.61 | $ | 1.22 | $ | 0.97 | ||||||
| Expected life of the options to convert | 1.32 | 1.17 | 0.86 | |||||||||
| Risk-free rate | 0.09 | % | 0.07 | % | 0.08 | % | ||||||
| Dividend yield | 0.0 | % | 0.0 | % | 0.0 | % | ||||||
The change into measure the fair value of the derivative warrant liabilities, measured using Level 3 inputs, forunderlying conversion feature of the three and nine months ended September 30, 2021 is summarized as follows:promissory note - related party at each measurement dates:
| June 30, 2022 | December 31, 2021 | |||||||
| Volatility | 53.9 | % | 67.2 | % | ||||
| Stock price | $ | 0.22 | $ | 0.88 | ||||
| Expected life of the options to convert | 0.42 | 0.61 | ||||||
| Risk-free rate | 2.23 | % | 0.23 | % | ||||
| Dividend yield | 0.0 | % | 0.0 | % | ||||
The change in the fair value of the Promissory Note –- related party measured with Level 3 inputs for the period for the ninesix months ended SeptemberJune 30, 2021,2022, is summarized as follows:
| Fair Value at January 1, 2021 | $ | - | ||
| Initial fair value of Promissory Note - related party - second quarter | 1,537,020 | |||
| Change in fair value of Promissory Note - related party | 145,180 | |||
| Fair Value of Promissory Note - related party, June 30, 2021 | 1,682,200 | |||
| Change in fair value of Promissory Note - related party | (297,230 | ) | ||
| Fair Value of Promissory Note - related party, September 30, 2021 | $ | 1,384,970 |
| Fair Value of Promissory Note - related party, December 31, 2021 | $ | 1,392,950 | ||
| Change in fair value of Promissory Note - related party | (41,590 | ) | ||
| Fair Value of Promissory Note - related party, March 31, 2022 | 1,351,360 | |||
| Change in fair value of Promissory Note - related party | 39,930 | |||
| Fair Value of Promissory Note - related party, June 30, 2022 | $ | 1,391,290 |
Note 11 —- Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date through, the date that the unaudited condensed financial statements were available to be issued. Based on this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.statements other than disclosed below.
On July 28, 2022, the Company entered into a second Loan Note Instrument (the “Second Loan Note”) with its Sponsor (“Payee”), pursuant to which, Payee, in its sole and absolute discretion, may loan to Compute Health up to $1.5 million for costs reasonably related to the Company’s consummation of an initial Business Combination. The Second Loan Note does not bear any interest. The Second Loan Note is payable on the earliest to occur of (i) the date on which Compute Health consummates its initial business combination and (ii) the date that the winding up of Compute Health is effective. The Second Loan Note is subject to customary events if default, including failure by Compute Health to pay the principal amount due pursuant to the Second Loan Note within five business days of the Maturity Date and certain bankruptcy events of Compute Health. On July 28, 2022, the Company borrowed $750,000 under the Second Loan Note.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to “we”, “us”, “our” or the “Company” are to Compute Health Acquisition Corp., except where the context requires otherwise. The following discussion should be read in conjunction with our unaudited condensed financial statements and related notes thereto included elsewhere in this report.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, 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. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-Q. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.
Overview
We are a blank check company incorporated in Delaware on October 7, 2020 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”). Our Sponsor is Compute Health Sponsor LLC, a Delaware limited liability company. We intend to complete our initial Business Combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our capital stock, debt or a combination of cash, stock and debt.
The registration statement for our Initial Public Offering became effective on February 4, 2021. On February 9, 2021, we consummated its Initial Public Offering of 86,250,000 Units, including 11,250,000 Over-Allotment Units to cover over-allotments, at $10.00 per Unit, generating gross proceeds of $862.5 million, and incurring offering costs of approximately $48.4 million, of which approximately $30.2 million was for deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated the Private Placement of 12,833,333 Private Placement Warrants, at a price of $1.50 per Private Placement Warrant to the Sponsor, generating proceeds of approximately $19.3 million.
Upon the closing of the Initial Public Offering and the Private Placement, $862.5 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was placed in a Trust Account located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and invested only in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, as determined by us, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.
If we are unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or February 9, 2023, (the “Combination Period”) and our stockholders have not amended the Certificate of Incorporation to extend such Combination Period, we will (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to us to pay our 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 Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the board of directors, dissolve and liquidate, subject in in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
The issuance of additional shares of our stock in a Business Combination:
| ● | may significantly dilute the equity interest of investors in Initial Public Offering, which dilution would increase if the anti-dilution provisions in the Class B common stock resulted in the issuance of Class A shares on a greater than one-to-one basis upon conversion of the Class B common stock; |
| ● | may subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock; |
| ● | could cause a change of control if a substantial number of shares of our common stock 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 officers and directors; |
| ● | may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; |
| ● | may adversely affect prevailing market prices for our Units, Class A common stock and/or warrants; and |
| ● | may not result in adjustment to the exercise price of our warrants. |
Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or owners of a target, 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 common stock; |
| ● | 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 common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund 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; |
| ● | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and |
| ● | other purposes and other disadvantages compared to our competitors who have less debt. |
Results of Operations
Our entire activity since inception through SeptemberJune 30, 20212022 related to our formation, the preparation for an Initial Public Offering, and since our Initial Public Offering, our activity has been limited to the search for a prospective initial Business Combination. We will not generate any operating revenues until the closing and completion of our initial Business Combination.
For the three months ended SeptemberJune 30, 2021,2022, we had annet income of approximately $19.2$9.8 million, which consisted of approximately $19.3$9.5 million for change in fair value of derivative liabilities and approximately $297,000 for change in fair value of promissory note, approximately $13,000 gain on$1.2 million from income from the investments held in the Trust Account, partially offset by approximately $420,000$40,000 for change in fair value of promissory note, approximately $617,000 of general and administrative expenses, and approximately $50,000 of franchise tax expense and approximately $219,000 of income tax expense. Due to the increase in income earned on the Trust Account which we expect continue in the second half of the year we are no longer projecting net operating losses. As a result, during the three and six months ended June 30, we had income tax expense of approximately $219,000. The Company’s effective tax rate was 2.20% and 0% for the three months ended June 30, 2022 and 2021, respectively. The effective tax rate differs from the statutory rate of 21%, primarily due to the changes in the fair value of warrant liabilities and the valuation allowance on deferred tax assets. There was no taxable income in the three and six months ended June 30, 2021.
For the ninethree months ended SeptemberJune 30, 2021, we had an incomea loss of approximately $3.3$10.7 million, which consisted of approximately $6.1$664,000 of general and administrative expenses, approximately $49,000 of franchise tax expense, approximately $9.8 million for change in fair value of derivative liabilities, approximately $152,000$145,000 for change in fair value of promissory note, and approximately $33,000$37,000 loss on the promissory note to related party, partially offset by approximately $13,000 gain on the investments held in the Trust Account.
For the six months ended June 30, 2022, we had net income of approximately $22.5 million, which consisted of approximately $22.7 million for change in fair value of derivative liabilities, approximately $2,000 for change in fair value of promissory note, and approximately $1.3 million from income from the investments held in the Trust Account, partially offset by approximately $1.4$1.2 million of general and administrative expenses, $100,000 of franchise tax expense and approximately $219,000 of income tax expense. The Company’s effective tax rate was 0.96% and 0% for the six months ended June 30, 2022 and 2021, respectively. The effective tax rate differs from the statutory rate of 21%, primarily due to the changes in the fair value of warrant liabilities and the valuation allowance on deferred tax assets. There was no taxable income in the three and six months ended June 30, 2021.
For the six months ended June 30, 2021, we had a loss of approximately $15.9 million, which consisted of approximately $1.0 million of general and administrative expenses, approximately $147,000$98,000 of franchise tax expense, approximately $13.2 million for change in fair value of derivative liabilities, approximately $145,000 for change in fair value of promissory note, approximately $37,000 loss on the promissory note to related party, and approximately $1.4 million of financingoffering costs to derivative warrant liabilities.liabilities, partially offset by approximately $20,000 gain on the investments held in the Trust Account.
Liquidity and Capital ResourcesGoing Concern
As of Septemberindicated in the accompanying unaudited condensed financial statements, at June 30, 2021,2022, we had approximately $959,000$67,000 cash in our operating bank accounts,hand, and a working capital of approximately $1.1 million$524,000 (not taking into account tax obligations of approximately $147,000$239,000 that may be paid using investment income earned in Trust Account). No amounts have been withdrawn from the Trust Account to pay taxes. In the three and six months ended June 30, 2022, $200,000 and $80,000 of franchise tax payments were made from our operating account and amounts have not been withdrawn from the Trust Account. No income tax payments have been made in the periods presented.
Our liquidity needs have been satisfied prior to the consummationcompletion of the Initial Public Offering were satisfied through the paymenta capital contribution from our Sponsor of $25,000 from the Sponsor to purchase Founder Shares, and borrowings under a Notean unsecured promissory note from our Sponsor of approximately $266,000.$170,000. We repaid the Note in full upon consummation of the Initial Public Offering. Subsequent from the consummation of the Initial Public Offering, our liquidity has been satisfied through the net proceeds from the consummation of the Initial Public Offering and the Private Placement held outside of the Trust Account. In addition,Account and the borrowings from our Sponsor under working capital loans.
While we do not believe we will need to raise additional funds in order to finance transaction costs in connection with a Business Combination,meet the expenditures required for operating our business, our Sponsor or an affiliate of theour Sponsor, or certain of our officers and directors may, but are not obligated to, provideloan us funds as may be required (“Working Capital Loans.Loans”). On April 6, 2021, we entered into a Loan Note Instrument (the “Loan Note” or “Promissory Note - related party”) with our Sponsor, pursuant to which, our Sponsor, in its sole and absolute discretion, may loan to us up to $1.5 million for costs reasonably related to the consummation of an initial Business Combination. The Loan Note does not bear any interest. The Loan Note is payable on the earliest to occur of (i) the date on which we consummate our initial Business Combination and (ii) the date that the winding up of our Company is effective. The Loan Note is subject to customary events if default, including failure by us to pay the principal amount due pursuant to the Loan Note within five business days of the Maturity Date and certain bankruptcy events of our Company.
At our Sponsor’s option, at any time prior to payment in full of the principal balance of the Loan Note, our Sponsor may elect to convert all or any portion of the unpaid principal balance of the Loan Note into that number of warrants, each whole warrant exercisable for one share of common stock of our Company (the “Conversion Warrants”), equal to: (x) the portion of the principal amount of the Loan Note being converted, divided by (y) $1.50, rounded up to the nearest whole number of warrants. The Conversion Warrants shall be identical to the warrants issued by us to the Sponsor in a private placement upon consummation of our initial public offering. The Conversion Warrants are subject to customary registration rights granted by us to the Sponsor pursuant to the Loan Note. As of SeptemberJune 30, 2021,2022, $1.5 million was drawn on the Promissory Note –- related party, presented at its fair value of $1.4 million on the accompanying unaudited condensed balance sheets.
Based
On July 28, 2022, we entered into a second Loan Note Instrument (the “Second Loan Note”) with our Sponsor (“Payee”), pursuant to which, Payee, in its sole and absolute discretion, may loan to Compute Health up to $1.5 million for costs reasonably related to our consummation of an initial Business Combination. The Second Loan Note does not bear any interest. The Second Loan Note is payable on the foregoing,earliest to occur of (i) the date on which we consummate an initial business combination and (ii) the date that the winding up of our Company is effective. On July 28, 2022, we borrowed $750,000 under the Second Loan Note.
In connection with the Company’s assessment of going concern considerations in accordance with the authoritative guidance in Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) ASC Topic 205-40, “Presentation of Financial Statements - Going Concern,” management believeshas determined that the mandatory liquidation and subsequent dissolution, should the Company be unable to complete a business combination, raises substantial doubt about the Company’s ability to continue as a going concern. The Company has until February 9, 2023, to consummate a Business Combination. It is uncertain that we will have sufficient working capital and borrowing capacitybe able to meet its needs through the earlier of the consummation ofconsummate a Business Combination or one year fromby this filing. Overtime. If a Business Combination is not consummated by this time period, wedate, there will be usinga mandatory liquidation and subsequent dissolution. No adjustments have been made to the funds held outsidecarrying amounts of assets or liabilities should the Trust Account 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 businessCompany be required to merge with or acquire, and structuring, negotiating and consummating the Business Combination.liquidate after February 9, 2023.
Management is currently evaluating the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have an effect on our financial position, results of our operations and/or search for a target company, 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
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations; Quarterly Results
As of September 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations other than obligations disclosed herein. No unaudited quarterly operating data is included in this annual report, as we have conducted no operations to date.
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 or warrants issued upon conversion of the Working Capital Loans), were entitled to registration rights pursuant to a registration rights agreement signed upon the consummation of the Initial Public Offering. These holders were entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provided that we would not be required to effect or permit any registration or cause any registration statement to become effective until termination of the applicable lock-up period. 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 date of Initial Public Offering to purchase up to 11,250,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. The underwriter exercised its over-allotment option in full on February 9, 2021.
The underwriters wereare entitled to an underwriting discount of $0.20 per Unit, or approximately $17.3 million in the aggregate, paid upon the closing of the Initial Public Offering. An additional fee of $0.35 per Unit, or approximately $30.2 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.
Deferred Legal fees
We have an agreement to obtain legal advisory services pursuant to which our legal counsel has agreed to defer their fees until the closing of the Business Combination. The deferred fees will become payable to the legal counsel in the event the Company completes a Business Combination. As of June 30, 2022, the amount of these fees is approximately $1.5 million, included as deferred legal fees on the accompanying balance sheets included in the condensed financial statements in Part 1 Item 1 of this Form 10-Q.
Administrative Services Agreement
Commencing on the date that our securities were first listed on the NYSE through the earlier of consummation of the initial Business Combination and the liquidation, we agreed to pay an affiliate of our Sponsor a total of $10,000 per month for administrative and support services. Our Sponsor has waived these fees through SeptemberJune 30, 2021.2022.
Critical Accounting Policies and Estimates
This management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of these condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our condensed financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have identified the following as our critical accounting policies:
Investments Held in Trust Account
Our portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When our investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When our investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds 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 is included in income from investments held in Trust Account in the accompanying unaudited condensed statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Derivative Warrant Liabilities
Derivative warrant liabilities
We evaluate all of itsour financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The warrants issued in connection with the Initial Public Offering (the “Public Warrants”) and the Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statementcondensed statements of operations. The fair value of the Public Warrants issued in connection with the Public Offering and Private Placement Warrants were initially measured at fair value using a Monte Carlo simulation model and subsequently, the fair value of the Private Placement Warrants have been estimated using a Monte Carlo simulation model each measurement date. The fair value of Public Warrants issued in connection with the Initial Public Offering have subsequently been measured based on the listed market price of such warrants. As the transfer of Private Placement Warrants to anyone who is not a permitted transferee would result in the Private Placement Warrants having substantially the same terms as the Public Warrants, we determined that the fair value of each Private Placement Warrant is equivalent to that of each Public Warrant. The fair value of the Warrants as of September 30,June 30,2022 and December 31, 2021, is based on observable listed prices for such warrants. The determination of the fair value of the warrant liability may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Promissory Note - Related Party
We have elected the fair value option to account for its Promissory Note - related party with our Sponsor as defined and more fully described in the Notes to the unaudited condensed financial statements. As a result of applying the fair value option, the Company records each draw at fair value with a gain or loss recognized at issuance, and subsequent changes in fair value are recorded as change in the fair value of its Promissory Note - related party on the condensed statements of operations. The fair value is based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s and, if applicable, an independent third-party valuation firm’s own assumption about the assumptions a market participant would use in pricing the asset or liability
Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities are expensed as incurred, presented as non-operating expenses in the statementcondensed statements of operations. Offering costs associated with the Class A common stock are charged against their carrying value upon the completion of the Initial Public Offering. Deferred underwriting commissions are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in accordance with the guidance in ASC 480. Class A common stock subject to mandatory redemption (if any) is classified as liability instruments and are measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, Class A common stock is classified as stockholders’ equity. Our Class A common stock feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, as of SeptemberJune 30, 2021,2022, and December 31, 2020,2021, 86,250,000 and -0- shares of Class A common stock subject to possible redemption is presented at redemption value as temporary equity, respectively, outside of the stockholders’ equity section of the unaudited condensed balance sheets.
We recognize changes in redemption value immediately as they occur and adjusts the carrying value of the Class A common stock subject to possible redemption to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security. Effective with the closing of the Initial Public Offering, we recognized the accretionremeasurement from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit. Subsequent changes in redemption value are recognized and presented as remeasurement of Class A common stock to redemption value on the accompanying statement of changes in stockholders’ equity (deficit) included in the condensed financial statements in Part 1 Item 1 of this Form 10-Q.
Net Income (Loss) Per Share of Common Stock
We comply with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” We have two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per common share is calculated by dividing the net income by the weighted average shares of common stock outstanding for the respective period.
The calculation of diluted net income (loss) per common stock does not consider the effect of the warrants issued in connection with the Initial Public Offering (including exercise of the over-allotment option) and the Private Placement to purchase an aggregate of 34,395,833 shares of common stock in the calculation of diluted income per share, because their exercise is contingent upon future eventsevents.
The calculation of diluted net income (loss) per common stock for the three and their inclusionsix months ended June 30, 2021 does not consider the effects of the Class B founder shares no longer subject to forfeiture and as the contingency resolved at the beginning of the period would be anti-dilutive under the treasury stock method. As a result, diluted net income per share is the same as basic net income per share for the three and nine months ended September 30, 2021. AccretionRemeasurement associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
Recent Accounting Pronouncements
In August 2020,See Note 2 to the FASB issued Accounting Standard Update (ASU) No. 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, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, and it also simplifies the diluted earnings per share calculation in certain areas. As permitted by the standard, we have elected to early adopt this standard in our first quarter of 2021 with no impact upon adoption.
Our management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying unaudited condensed financial statements.statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The Jumpstart Our Business StartupsJOBS Act of 2012 (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, theour condensed 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,”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 controls 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’sChief Executive Officer’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
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2021, 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 officer has concluded that during the period covered by this report, our disclosure controls and procedures were not effective as of September 30, 2021, because of a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, the Company’s management has concluded that our control around the interpretation and accounting for certain complex features of the Class A common stock and warrants issued by the Company was not effectively designed or maintained. This material weakness resulted in the restatement of the Company’s balance sheet as of February 9, 2021 and its interim financial statements for the quarters ended March 31, 2021 and June 30, 2021. Additionally, this material weakness could result in a misstatement of the warrant liability, Class A common stock and related accounts and disclosures that would result in a material misstatement of the financial statements that would not be prevented or detected on a timely basis.
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate 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 officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended June 30, 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 officer has concluded that during the period covered by this report, our disclosure controls and procedures were effective as of June 30, 2022.
We previously identified a material weakness in 2021 related to our control around the interpretation and accounting for certain complex financial instruments that was not effectively designed or maintained. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We designed and implemented new controls to remediate the control. We have expanded and improved our processes to ensure that the nuances of such transactions were effectively evaluated in the context of increasingly complex accounting standards. Based on the actions taken, as well as the evaluation of the design of the new controls, we concluded that the controls were operating effectively as of June 30, 2022. As a result, management concluded that the material weakness was remediated as of June 30, 2022.
Changes in Internal Control over Financial Reporting
Other than as noted above, there wasThere were no changechanges in our internal control over financial reporting that occurred(as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter ended September 30, 2021 covered by this Quarterly Report on Form 10-Q that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting except forreporting. Based on the below:evaluation we conducted, other than remediation of the material weakness identified and discussed above, our management has concluded that no such changes have occurred.
The Co-Chief Executive Officers, one of whom serves as principal executive officer and the other as principal financial officer, performed additional accounting and financial analyses and other post-closing procedures including consulting with subject matter experts related to the accounting for certain complex features of the Class A common stock and warrants. The Company’s management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation and improvement of our internal control over financial reporting. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we have expanded and will continue to improve these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards.
PART II—OTHERII-OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Except as set forth below, as of the date ofFactors that could cause our actual results to differ materially from those in this Quarterly Report there have been no material changes with respect to those risk factorsare any of the risks previously disclosed in our final prospectusAnnual Report on Form 10-K filed with the SEC on February 9, 2021.March 31, 2022. Any of thesethose factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
Our Warrants are accounted for as liabilities and the changes in value of our Warrants could have a material effect on our financial results.
On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the SEC together issued the SEC Statement, which focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement governing our Warrants. As a result of the SEC Statement, we reevaluated the accounting treatment of our 21,562,500 Public Warrants and 12,833,333 Private Placement Warrants (collectively, the “Warrants”) issued on February 9, 2021 and determined to classify the Warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings (see Note 2).
As a result, included on our balance sheet as of March 31, 2021 are derivative liabilities related to the embedded features contained within our Warrants. ASC 815 provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations. As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly, based on factors which are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our Warrants each reporting period and that the amount of such gains or losses could be material.
As of the date of this Quarterly Report, on Form 10-Q, except for the risk factor described above with respect to changes in value of our warrants, there have been no material changes to the risk factors disclosed in our prospectus dated February 4, 2021Annual Report on Form 10-K filed with the SEC on February 8, 2021.March 31, 2022, except as described below. We may disclose additional changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
We have identifiedChanges in laws or regulations or how such laws or regulations are interpreted or applied, or a material weakness in our internal control over financial reporting. This material weakness could continuefailure to comply with any laws or regulations, may adversely affect our business, including our ability to reportnegotiate and complete our initial Business Combination, and results of operations and financial condition accurately and in a timely manner.operations.
After consultation with our independent registered public accounting firm following the issuance of the SEC Staff Statement on April 12, 2021, our management and our audit committee concluded that, in light of the SEC Staff Statement, it was appropriate to restate our previously issued and audited balance sheet as of February 16, 2021.
Our management is responsible for establishing and maintaining adequate internal controls over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses identified through such evaluation of those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis.
As described elsewhere in this Quarterly Report, we have identified a material weakness in our internal control over financial reporting related to the accounting for a significant and unusual transaction related to the warrants we issued in connection with our initial public offering in February 2021. As a result of this material weakness, our management has concluded that our internal control over financial reporting was not effective as of February 16, 2021. This material weakness resulted in a material misstatement of our derivative warrant liabilities, Class A common stockWe are subject to possible redemption, additional paid-in capital, accumulated deficitlaws and related financial disclosures as of February 16, 2021. For a discussion of management’s consideration of the material weakness identified related to our accounting for a significantregulations enacted by national, regional and unusual transaction related to the warrants we issued in connection with our IPO.
As described in Item 4. “Controls and Procedures,” we have concluded that our internal controls over financial reporting was ineffective as of June 30, 2021 because a material weakness existed in our internal control over financial reporting. We have taken a number of measures to remediate the material weakness described therein; however, iflocal governments. In particular, we are unablerequired to remediatecomply with certain SEC and other legal requirements, our material weakness in a timely manner or we identify additional material weaknesses, weBusiness Combination may be unablecontingent on our ability to provide required financial information in a timely or reliable mannercomply with certain laws and weregulations and any post-Business Combination company may incorrectly report financial information. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC or other regulatory authorities. In such a case, there could result a material adverse effect on our business. The existenceadditional laws and regulations. Compliance with, and monitoring of, material weaknesses or significant deficiencies in internal control over financial reporting could adversely affect our reputation or investor perceptions of us, which could have a negative effect on the trading price of our stock. In addition, weapplicable laws and regulations may incur additional costs to remediate the material weakness in our internal control over financial reporting, as described in Item 4. “Controlsbe difficult, time consuming and Procedures.”
We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to acostly. A failure to implementcomply with applicable laws or regulations, as interpreted and maintain adequate internal control over financial reporting or circumvention of these controls or otherwise.
We may face litigation and other risks as a result of the material weakness in our internal control over financial reporting.
Following the issuance of the SEC Staff Statement, after consultation with our independent registered public accounting firm, our management and our audit committee concluded that it was appropriate to restate our previously issued audited balance sheet as of February 16, 2021. As part of the restatement, we identified a material weakness in our internal controls over financial reporting.
As a result of such material weakness, the restatement, the change in accounting for the warrants, and other matters raised or that may in the future be raised by the SEC, we face potential litigation or other disputes, which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from, among others, the restatement and material weakness in our internal control over financial reporting and the preparation of our financial statements. As of the date of this Quarterly Report, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not,applied, could have a material adverse effect on our business, results of operations and financial condition orincluding our ability to negotiate and complete our initial Business Combination, and results of operations. In addition, those laws and regulations and their interpretation and application may change from time to time, including as a result of changes in economic, political, social and government policies, and those changes could have a material adverse effect on our business, including our ability to negotiate and complete our initial Business Combination.Combination, and results of operations.
ForOn March 30, 2022, the SEC issued proposed rules that would, among other items, impose additional disclosure requirements in Business Combination transactions involving special purpose acquisition companies (“SPACs”) and private operating companies; amend the financial statement requirements applicable to Business Combination transactions involving such companies; update and expand guidance regarding the general use of projections in SEC filings, as well as when projections are disclosed in connection with proposed Business Combination transactions; increase the potential liability of certain participants in proposed Business Combination transactions; and impact 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 business, including our ability to negotiate and complete list of risks relating to our operations, seeinitial Business Combination and may increase the section titled “Risk Factors” contained in our prospectus dated February 4, 2021.costs and time related thereto.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities
On February 9, 2021, we consummated our Initial Public Offering of 86,250,000 Units, inclusive of 11,250,000 Units sold to the underwriters upon the election to fully exercise its over-allotment option, at a price of $10.00 per Unit, generating total gross proceeds of $862,500,000. Goldman Sachs & Co. LLC acted as the sole book-running manager. The securities sold in the offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333-252245). The registration statement became effective on December 9, 2020.None.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of 12,833,333 Private Placement Warrants at a price of $1.50 per Private Placement Warrant to the Sponsor, generating proceeds of $19,250,000. Such securities were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants are not transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.
Of the gross proceeds received from the Initial Public Offering including the full exercise of the option to purchase additional Units, and the sale of the Private Placement Warrants, $862,500,000 was placed in the Trust Account.
We paid a total of $17,250,000 in underwriting discounts and commissions related to the Initial Public Offering. In addition, the underwriters agreed to defer $30,187,500 in underwriting discounts and commissions.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
| ** | Furnished. |
| (1) | Previously filed as an exhibit to our Current Report on Form 8-K filed on February 9, 2021 and incorporated by reference herein. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrantregistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| COMPUTE HEALTH ACQUISITION CORP. | |||
| Date: | /s/ Joshua Fink | ||
| Name: | Joshua Fink | ||
| Title: | Co-Chief Executive Officer | ||
| (Principal Financial and Accounting Officer) | |||
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