Astrea Acquisition Corp. - Quarter Report: 2022 March (Form 10-Q)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Delaware		85-2609730
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Units, each consisting of one share of Common Stock and one-half of one redeemable warrant		ASAXU		The Nasdaq Stock Market LLC
Common Stock, par value $0.0001 per share		ASAX		The Nasdaq Stock Market LLC
Redeemable warrants, exercisable for shares of Common Stock at an exercise price of $11.50 per share		ASAXW		The Nasdaq Stock Market LLC

Large accelerated filer		☐		Accelerated filer		☐
Non-accelerated filer		☒		Smaller reporting company		☒
				Emerging growth company		☒

		Page
Part I. Financial Information
Item 1. Financial Statements			1
Condensed Consolidated Balance Sheets as of March 31, 2022 (Unaudited) and December 31, 2021			1
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021 (Unaudited)			2
Condensed Consolidated Statements of Changes in Stockholders’ (Deficit) Equity for the Three Months Ended March 31, 2022 and 2021 (Unaudited)			3
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (Unaudited)			4
Notes to Condensed consolidated financial Statements (Unaudited)			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			18
Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk			21
Item 4. Controls and Procedures			21
Part II. Other Information
Item 1A. Risk Factors			22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			23
Item 5. Other Information			23
Item 6. Exhibits			24
Part III. Signatures			25

		March 31, 2022				December 31, 2021
		(Unaudited)
ASSETS
Current assets
Cash		$	30,094			$	67,689
Prepaid expenses			255,933				344,659
Total Current Assets			286,027				412,348
Cash and marketable securities held in Trust Account			172,625,112				172,561,080
TOTAL ASSETS		$	172,911,139			$	172,973,428
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accrued expenses		$	349,884			$	459,988
Promissory note – related party			1,140,000				750,000
Total Current Liabilities			1,489,884				1,209,988
Warrant liabilities			40,114				342,190
Total Liabilities			1,529,998				1,552,178
Commitments
Common stock subject to possible redemption; $0.0001 par value; 17,250,000 shares at redemption value as of March 31, 2022 and December 31, 2021			172,500,000				172,500,000
Stockholders’ Deficit
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding			—				—
Common stock, $0.0001 par value; 50,000,000 shares authorized; 4,787,500 shares issued and outstanding (excluding 17,250,000 shares subject to possible redemption) as of March 31, 2022 and December 31, 2021			479				479
Additional paid-in capital			554,160				554,160
Accumulated deficit			(1,673,498	)			(1,633,389	)
Total Stockholders’ Deficit			(1,118,859	)			(1,078,750	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	172,911,139			$	172,973,428

		Three Months Ended March 31,
		2022				2021
Operating and formation costs		$	406,217			$	220,267
Loss from operations			(406,217	)			(220,267	)
Other income (expense):
Interest earned on marketable securities held in Trust Account			44,835				10,390
Unrealized gain on marketable securities held in Trust Account			19,197				—
Change in fair value of warrant liability			302,076				52,250
Change in fair value of over-allotment option liability			—				134,105
Transaction costs associated with Initial Public Offering			—				(17,428	)
Total other income, net			366,108			$	179,317
Net loss		$	(40,109	)		$	(40,950	)
Basic and diluted weighted average shares outstanding, Common stock			22,037,500			$	13,795,417
Basic and diluted net loss per share, Common stock		$	(0.00	)		$	(0.00	)

		Common Stock								Additional Paid in Capital				Accumulated Deficit				Total Stockholders’ Deficit
		Shares				Amount
Balance – January 1, 2022			4,787,500			$	479			$	554,160			$	(1,633,389	)		$	(1,078,750	)
Net loss			—				—				—				(40,109	)			(40,109	)
Balance – March 31, 2022			4,787,500			$	479			$	554,160			$	(1,673,498	)		$	(1,118,859	)

		Common Stock								Additional Paid in Capital				Accumulated Deficit				Total Stockholders’ Equity
		Shares				Amount
Balance – January 1, 2021			4,312,500			$	431			$	24,569			$	(627	)		$	24,373
Accretion of Common Stock to redemption value			—				—				(11,262,350	)			—				(11,262,350	)
Sale of 475,000 Private Placement Units			475,000				48				4,562,327				—				4,562,942
Fair value of Public Warrants			—				—				6,780,799				—				6,780,799
Allocated value of transaction costs to warrants			—				—				(165,442	)			—				(165,442	)
Elimination of over-allotment option liability			—				—				614,257				—				614,257
Net loss			—				—				—				(40,950	)			(40,950	)
Balance – March 31, 2021			4,787,500			$	479			$	554,160			$	(41,577	)		$	513,062

		Three Months Ended March 31,
		2022				2021
Cash Flows from Operating Activities:
Net loss		$	(40,109	)		$	(40,950	)
Adjustments to reconcile net loss to net cash used in operating activities:
Change in fair value of warrant liabilities			(302,076	)			(52,250	)
Interest earned on marketable securities held in Trust Account			(44,835	)			(10,390	)
Unrealized gain on marketable securities held in Trust Account			(19,197	)			—
Change in fair value of over-allotment option liability			—				(134,105	)
Transaction costs incurred in connection with Initial Public Offering			—				17,428
Changes in operating assets and liabilities:
Prepaid expenses			88,726				(840,249	)
Accrued expenses			(110,104	)			89,200
Net cash used in operating activities			(427,595	)			(971,316	)
Cash Flows from Investing Activities:
Investment in cash into Trust Account			—				(172,500,000	)
Net cash used in investing activities			—				(172,500,000	)
Cash Flows from Financing Activities:
Proceeds from sale of Units, net of underwriting discounts			—				169,050,000
Proceeds from sale of Private Placement Units			—				4,750,000
Proceeds from promissory note – related party			390,000				350,000
Repayment of promissory note – related party			—				(85,302	)
Payment of offering costs			—				(355,934	)
Net cash provided by financing activities			390,000				173,708,764
Net Change in Cash			(37,595	)			237,448
Cash – Beginning of period			67,689				—
Cash – End of period		$	30,094			$	237,448
Non-cash investing and financing activities:
Initial Classification of Warrant Liability		$	—			$	187,625

Gross proceeds		$	172,500,000
Less:
Proceeds allocated to Public Warrants			(6,780,799	)
Common stock issuance costs			(3,733,189	)
Overallotment Liability			(748,362	)
Plus:
Accretion of carrying value to redemption value			11,262,350
Common stock subject to possible redemption		$	172,500,000

		Three Months Ended March 31,
		2022				2021
Basic and diluted net loss per common stock
Numerator:
Allocation of net loss, as adjusted		$	(40,109	)		$	(40,950	)
Denominator:
Basic and diluted weighted average shares outstanding			22,037,500				13,795,417
Basic and diluted net loss per common stock		$	(0.00	)		$	(0.00	)

On August 19, 2020, the Company issued an unsecured promissory note to the Sponsor (the “Promissory Note”), pursuant to which the Company may borrow up to an aggregate principal amount of $150,000. The Promissory Note was amended on December 31, 2020, such that it is bearing and payable on the earlier of (i) June 30, 2021 or the consummation of the Initial Public Offering. The outstanding balance under the Promissory Note of $130,061 was repaid on February 22, 2021.

On March 17, 2021, August 25, 2021, October 10, 2021 and December 12, 2021, the Company entered into convertible promissory notes with the Sponsor pursuant to which the Sponsor agreed to loan the Company up to an aggregate principal amount of $1,500,000 (the “Promissory Notes”). The Company subsequently amended and restated the Promissory Notes to remove the convertible option feature. On January 24, 2022, January 28, 2022, March 1, 2022, March 8, 2022 and March 31, 2022, the company entered into additional promissory notes. The Promissory Notes are bearing and payable on the earlier of the date on which the Company consummates a Business Combination or the date that the winding up of the Company is effective. If the Company does not consummate a Business Combination, the Company may use a portion of any funds held outside the Trust Account to repay the Promissory Notes; however, no proceeds from the Trust Account may be used for such repayment. As of March 31, 2022 and December 31, 2021, the outstanding principal balance under the Promissory Notes amounted to an aggregate of $1,140,000 and $750,000, respectively.

The Company granted the underwriters a option to purchase up to 2,250,000 additional Units to cover over-allotments at the Initial Public Offering price less the underwriting discounts and commissions. On February 18, 2021, the underwriters elected to fully exercise the over-allotment option to purchase an additional 2,250,000 Units at a price of $10.00 per Unit.

The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At March 31, 2022 and December 31, 2021, there were no shares of preferred stock issued or outstanding.

— The Company is authorized to issue 50,000,000 shares of common stock with a par value of $0.0001 per share. At March 31, 2022 and December 31, 2021, there are 4,787,500 shares of common stock issued and outstanding, excluding 17,250,000 shares of common stock subject to possible redemption which are presented as temporary equity.

— The Public Warrants will become exercisable 30 days after the completion of a Business Combination. No warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to such shares of common stock. Notwithstanding the foregoing, if a registration statement covering the shares of common stock issuable upon exercise of the Public Warrants is not effective within a specified period following the consummation of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.

The Private Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Warrants and the shares of common stock issuable upon the exercise of the Private Warrants are not transferable, assignable or saleable until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Warrants will be exercisable for cash or on a cashless basis, at the holder’s option, and be so long as they are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

The Company follows the guidance in ASC 820 for its financial assets and liabilities that are and reported at fair value at each reporting period, and assets and liabilities that are and reported at fair value at least annually.

		Level 1:		Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
		Level 2:		Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
		Level 3:		Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

The Private Warrants are accounted for as liabilities in accordance with ASC and are presented within warrant liability in the condensed consolidated balance sheets. The warrant liability is measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liability in the condensed consolidated statements of operations.

The Company established the initial fair value for the Private Warrants on February 8, 2021, the date of the Company’s Initial Public Offering, using a binomial lattice model for the Private Warrants. The Company allocated the proceeds received from (i) the sale of Units (which is inclusive ofone share of common stock and of one redeemable warrant), and (2) the sale of Private Warrants, first to the Private Warrants based on their fair values as determined at initial measurement, with the remaining proceeds allocated to common stock subject to possible redemption based on their relative fair values at the initial measurement date. The Private Warrants are classified as Level 3 due to the use of unobservable inputs.

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the completion of the Proposed Business Combination (as defined below), the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements, including that the conditions of the Proposed Business Combination are not satisfied. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

We have neither engaged in any operations nor generated any revenues to date. Our only activities from August 11, 2020 (inception) through March 31, 2022 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We generate income in the form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

We have no obligations, assets or liabilities, which would be considered sheet arrangements as of March 31, 2022. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating sheet arrangements. We have not entered into any sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any assets.

The Company accounts for its promissory notes that feature conversion options in accordance with ASC No. 815, (). ASC No. 815 requires companies to bifurcate conversion options from their host instruments and account for them as freestanding derivative financial instruments according to certain criteria. The criteria includes circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) a promissory note that embodies both the embedded derivative instrument and the host contract is not at fair value under otherwise applicable GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

We account for the Warrants in accordance with the guidance contained in ASC under which the Private Placement Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the Private Placement Warrants as liabilities at their fair value and adjust the Private Placement Warrants to fair value at each reporting period. This liability is subject to at each balance sheet date until exercised, and any change in fair value is recognized in our condensed consolidated statements of operations. The Private Placement Warrants are valued using binomial lattice model.

In August 2020, the FASB issued ASU No. with Conversion and Other Options (Subtopic and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. 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. ASU is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact, if any, that ASU2020-06would have on its financial position, results of operations or cash flows.

As required by Rules and under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2022. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective, due solely to the material weakness in our internal control over financial reporting related to the Company’s accounting for complex financial instruments and fair value instruments, including fair value measurement. As a result, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Form present fairly in all material respects our financial position, results of operations and cash flows for the period presented.

This Quarterly Report on Form does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.

There were no changes in our internal control over financial reporting (as such term is defined in Rules and of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As of the date of this Quarterly Report, there have been no material changes with respect to those risk factors previously disclosed in our Annual Report on Form dated May 23, 2022 and Quarterly Report on Form for the quarter ended March 31, 2021, except as set forth below. Any of these 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.

On February 8, 2021, we consummated the Initial Public Offering of 15,000,000 Units. The Units were sold at an offering price of $10.00 per unit, generating total gross proceeds of $150,000,000. EarlyBirdCapital, Inc. acted as sole book-running manager of the Initial Public Offering. The securities in the offering were registered under the Securities Act on registration statement on Form (No. The Securities and Exchange Commission declared the registration statements effective on February 3, 2021.

Simultaneous with the consummation of the Initial Public Offering, the Sponsor consummated the private placement of an aggregate of 430,000 Units at a price of $10.00 per Private Unit, generating total proceeds of $4,300,000. Each Private Unit consists of one share of common stock (“Private Share”) and of one redeemable warrant (“Private Warrant”). Each whole Private Warrant is exercisable to purchase one share of common stock at an exercise price of $11.50 per share. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.

For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form

On August 16, 2021, the Sponsor committed to provide the Company with an aggregate of up to $400,000 in loans through August 16, 2022 if needed. Any loan made pursuant to this commitment will be bearing, unsecured and will be repaid upon the consummation of an initial business combination or converted into units at the option of the holder. If the Company does not consummate an initial business combination, all amounts loaned to the Company will be forgiven except to the extent that it has funds available outside of the Trust Account to repay such loans. As of March 31, 2022, the Sponsor loaned the Company an aggregate of $1,140,000 to cover expenses related to the Business Combination. The notes may be repaid upon completion of a Business Combination, without interest, or, at the lender’s discretion.

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form