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Athlon Acquisition Corp. - Quarter Report: 2022 September (Form 10-Q)

Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
10-Q
 
 
(MARK ONE)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
 
☐
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:001-39870
 
 
ATHLON ACQUISITION CORP.
(Exact Name of Registrant as Specified in Its Charter)
 
 
 
Delaware
  
85-3331021
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
c/o Causeway Media Partners
44 Brattle Street
Cambridge, MA 02138
(Address of principal executive offices)
(617)855-6333
(Issuer’s telephone number)
N/A
(Former name, former address and former fiscal year, if changed since the last report)
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
  
Trading
Symbols
  
Name of each exchange
on which registered
Units, each consisting of one share of Class A common stock and
one-half
of one redeemable warrant
  
SWETU
  
The Nasdaq Stock Market LLC
Class A common stock, par value $0.0001 per share
  
SWET
  
The Nasdaq Stock Market LLC
Redeemable warrants, each whole warrant exercisable for one share of Class A common stock, each at an exercise price of $11.50 per share
  
SWETW
  
The Nasdaq Stock Market LLC
Check 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 past 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, anon-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-2of
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
Rule12b-2of
the Exchange Act).    Yes  ☒    No  ☐
As of November
9
, 2022, there were 27,600,000 shares of Class A common stock, $0.0001 par value and 6,900,000 shares of Class B common stock, $0.0001 par value, issued and outstanding.
 
 
 

Table of Contents

ATHLON ACQUISITION CORP.

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2022

TABLE OF CONTENTS

 

     Page  

Part I. Financial Information

  

Item 1. Interim Condensed Financial Statements

      1  

Condensed Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021

      1  

Unaudited Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021

      2  

Unaudited Condensed Statements of Changes in Stockholders’ Equity (Deficit) for the Three and Nine Months Ended September 30, 2022 and 2021

      3  

Unaudited Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021

      4  

Notes to Unaudited Condensed Financial Statements

      5  

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

      17  

Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk

      19  

Item 4. Controls and Procedures

      19  

Part II. Other Information

   

Item 1. Legal Proceedings

      20  

Item 1A. Risk Factors

      20  

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

      20  

Item 3. Defaults Upon Senior Securities

      21  

Item 4. Mine Safety Disclosures

      21  

Item 5. Other Information

      21  

Item 6. Exhibits

      21  

Part III. Signatures

      22  

Table of Contents

EXPLANATORY NOTE

As discussed in this Quarterly Report on Form 10-Q, Athlon Acquisition Corp. (the “Company”) filed a Current Report on Form 8-K on November 9, 2022 (the “November Form 8-K”) announcing that, as the Company will not consummate an initial business combination within 24 months from the closing of the Company’s Initial Public Offering, the Company will redeem all of its outstanding shares of Class A common stock that were included in the units issued in its initial public offering (the “Public Shares”), effective as of the close of business on December 1, 2022. Following the redemption, subject to the approval of the Company’s remaining shareholders and its board of directors, it will dissolve and liquidate. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless.

The redemption of the Public Shares and subsequent dissolution of the Company are discussed in this report. This report also contains historical disclosure discussing the Company’s pursuit of and potential consummation of an initial business combination. The description of the upcoming redemption of the Public Shares and subsequent dissolution of the Company as set forth in the November Form 8-K and this report supersede the historical disclosure regarding the Company’s efforts to pursue an initial business combination.

Table of Contents
PART I—FINANCIAL INFORMATION
Item 1. Interim Condensed Financial Statements.
ATHLON ACQUISITION CORP.
UNAUDITED CONDENSED BALANCE SHEETS
 
    
September 30, 2022
(Unaudited)
    
December 31,
2021
  
ASSETS
                 
Current assets
                 
Cash
    $ 335,681     $ 666,122  
Prepaid expenses
      86,958       275,000  
    
 
 
    
 
 
  
Total Current Assets
      422,639       941,122  
Investments held in Trust Account
      277,371,747       276,039,258  
    
 
 
    
 
 
  
TOTAL ASSETS
   
$
277,794,386
 
  
$
276,980,380
 
    
 
 
    
 
 
  
LIABILITIES AND STOCKHOLDERS’ DEFICIT
                 
Current liabilities
                 
Accrued expenses
    $ 618,000     $ 726,537  
Income taxes payable
      282,363       —    
    
 
 
    
 
 
  
Total Current Liabilities
      900,363       726,537  
Warrant liabilities
      852,800       12,789,868  
Deferred underwriting fee payable
      9,660,000       9,660,000  
    
 
 
    
 
 
  
Total Liabilities
   
 
11,413,163
 
  
 
23,176,405
 
    
 
 
    
 
 
  
Commitments and Contingencies (Note 6)
               
Class A common stock subject to possible redemption, $0.0001 par value; 27,600,000 shares issued and outstanding at
$10.0
6
 and
 
$10.00 per share redemption value as of September 30, 2022 and
December 31, 2021, respectively
      277,341,747       276,000,000  
    
 
 
    
 
 
  
Stockholders’ Deficit
                 
Preferred stock, $0.0001 par value; 1,000,000
shares authorized;
 
none
 iss
ue or
 
no
non redeemable shares issued
and
 
outstanding
      —         —    
Class A common stock, $0.0001 par value; 380,000,000 shares authorized; none
issue or no non redeemable shares issued and outstanding
             
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 6,900,000 shares issued and outstanding as of September 30, 2022 and December 31, 2021
      690       690  
Additional
paid-in
capital
      —         —    
Accumulated deficit
      (10,961,214 )      (22,196,715 ) 
    
 
 
    
 
 
  
Total Stockholders’ Deficit
   
 
(10,960,524
) 
  
 
(22,196,025
) 
    
 
 
    
 
 
  
TOTAL LIABILITIES AND STOCKHOLDERS’
DEF
ICIT
   
$
277,794,386
 
  
$
276,980,380
 
    
 
 
    
 
 
  
The accompanying notes are an integral part of the unaudited condensed financial statements.
 
1
Table of Contents
ATHLON ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
 
    
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
    
2022
    
2021
    
2022
    
2021
  
Formation and operational costs
    $ 239,914     $ 205,246     $ 729,946     $ 1,022,678  
    
 
 
    
 
 
    
 
 
    
 
 
  
Loss from operations
   
 
(239,914
) 
  
 
(205,246
) 
  
 
(729,946
) 
  
 
(1,022,678
) 
Other income
(expense):
                                 
Change in fair value of warrant liabilities
      1,705,600       1,279,200       11,937,068       1,492,400  
Transaction costs incurred in connection with warrant liabilities
      —         —         —         (611,630 ) 
Interest earned on investments held in Trust Account
      1,479,038       4,957       1,652,489       33,421  
    
 
 
    
 
 
    
 
 
    
 
 
  
Other income, net
      3,184,638       1,284,157       13,589,557       914,191  
    
 
 
    
 
 
    
 
 
    
 
 
  
Income before provision for income taxes
      2,944,724       1,078,911       12,859,611       (108,487 ) 
Provision for income taxes
      (282,363 )      —       (282,363 )      —  
    
 
 
    
 
 
    
 
 
    
 
 
  
Net income (loss)
   
$
2,662,361
 
  
$
1,078,911
 
  
$
12,577,248
 
  
$
(108,487
) 
    
 
 
    
 
 
    
 
 
    
 
 
  
Weighted average shares outstanding, Class A common stock
      27,600,000       27,600,000       27,600,000       26,280,882  
    
 
 
    
 
 
    
 
 
    
 
 
  
Basic and diluted net income (loss) per share, Class A common stock
   
$
0.08
 
  
$
0.03
 
  
$
0.36
 
  
$
(0.00
) 
    
 
 
    
 
 
    
 
 
    
 
 
  
Basic weighted average shares outstanding, Class B common stock
      6,900,000       6,900,000       6,900,000       6,856,985  
    
 
 
    
 
 
    
 
 
    
 
 
  
Basic net income (loss) per share, Class B common stock
   
$
0.08
 
  
$
0.03
 
  
$
0.36
 
  
$
(0.00
) 
    
 
 
    
 
 
    
 
 
    
 
 
  
Diluted Weighted average shares outstanding of Class B common stock
      6,900,000       6,900,000       6,900,000       6,900,000  
    
 
 
    
 
 
    
 
 
    
 
 
  
Diluted net income (loss) per share, Class B common stock
   
$
0.08
 
  
$
0.03
 
  
$
0.36
 
  
$
(0.00
) 
    
 
 
    
 
 
    
 
 
    
 
 
  
The accompanying notes are an integral part of the unaudited condensed financial statements.
 
2
Table of Contents
ATHLON ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
 
    
Class A
Common Stock
     
Class B
Common Stock
     
Additional
Paid-in

Capital
     
Accumulated
Deficit
    
Total
Stockholders’
Equity (Deficit)   
  
    
Shares
     
Amount
     
Shares
     
Amount
                      
Balance — January 1, 2022
   
 
—  
 
   
$
—  
     
 
6,900,000
 
   
$
690
 
   
$
—  
     
$
(22,196,715
) 
  
$
(22,196,025
) 
Net income
      —          —          —          —          —          7,182,495       7,182,495  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
Balance – March 31, 2022 (unaudited)
   
 
—  
 
   
 
—  
 
   
 
6,900,000
 
   
$
690
 
   
 
—  
 
   
 
(15,014,220
) 
  
 
(15,013,530
) 
Net income
      —          —          —          —          —          2,732,392       2,732,392  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
Balance – June 30, 2022 (unaudited)
   
 
—  
 
   
 
—  
 
   
 
6,900,000
 
   
$
690
 
   
 
—  
 
   
 
(12,281,828
) 
  
 
(12,281,138
) 
Remeasurement of carrying value to redemption value
      —          —          —          —          —          (1,341,747 )      (1,341,747 ) 
Net income
      —          —          —          —          —          2,662,361       2,662,361  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
Balance – September 30, 2022 (unaudited)
   
 
—  
 
   
$
—  
     
 
6,900,000
 
   
$
690
 
   
$
—  
     
$
(10,961,214
) 
  
$
(10,960,524
) 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
 
    
Class A
Common Stock
     
Class B
Common Stock
     
Additional
Paid-in

Capital
    
Accumulated
Deficit
    
Total
Stockholders’
Equity
 
(Deficit)
  
    
Shares
     
Amount
     
Shares
     
Amount
                     
Balance — January 1, 2021
      —       
$
—  
     
 
6,900,000
 
   
$
690
 
   
$
24,310
 
  
$
(2,241
) 
  
$
22,759
 
Cash paid in excess of fair value for Private Placement Warrants
      —          —          —          —          1,729,600       —         1,729,600  
Accretion for Class A common stock subject to redemption amount
      —          —          —          —          (1,753,910 )      (23,910,222 )      (25,664,132 ) 
Net income
      —          —          —          —          —         3,664,123       3,664,123  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
    
 
 
  
Balance – March 31, 2021 (unaudited)
      —       
 
—  
 
   
 
6,900,000
 
   
$
690
 
   
 
—  
 
  
 
(20,248,340
) 
  
 
(20,247,650
) 
Net loss
      —          —          —          —          —         (4,851,521 )      (4,851,521 ) 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
    
 
 
  
Balance – June 30, 2021 (unaudited)
      —       
 
—  
 
   
 
6,900,000
 
   
$
690
 
   
 
—  
 
  
 
(25,099,861
) 
  
 
(25,099,171
) 
Net income
      —          —          —          —          —         1,078,911       1,078,911  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
    
 
 
  
Balance – September 30, 2021 (unaudited)
      —       
$
—  
     
 
6,900,000
 
   
$
690
 
   
$
 —  
 
  
$
(24,020,950
) 
  
$
(24,020,260
) 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
    
 
 
  
The accompanying notes are an integral part of the unaudited condensed financial statements.
 
3
Table of Contents
ATHLON ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

 
 
  
For the Nine Months Ended September 30,
 
 
  
2022
 
 
2021
 
Cash Flows from Operating Activities:
  
 
Net income (loss)
    $ 12,577,248     $ (108,487 ) 
Adjustments to reconcile net income (loss) to net cash used in operating activities:
                 
Interest earned on marketable securities held in Trust Account
      (1,652,489 )      (33,421 ) 
Change in fair value of warrant liabilities
      (11,937,068 )      (1,492,400 ) 
Transaction costs incurred in connection with warrant liabilities
      —         611,630  
Changes in operating assets and liabilities:
                 
Prepaid expenses
      188,042       (361,878 ) 
Accrued expenses
      (108,537 )      551,242  
Income taxes payable
      282,363       —    
    
 
 
    
 
 
  
Net cash used in operating activities
   
 
(650,441
) 
  
 
(833,314
) 
    
 
 
    
 
 
  
Cash Flows from Investing Activities:
                 
Investment of cash in Trust Account
      —         (276,000,000 ) 
Cash withdrawn from Trust Account to pay taxes
      320,000       —    
    
 
 
    
 
 
  
Net cash provided by (used in) investing activities
   
 
320,000
 
  
 
(276,000,000
) 
    
 
 
    
 
 
  
Cash Flows from Financing Activities:
                 
Proceeds from sale of Units, net of underwriting discounts paid
      —         270,480,000  
Proceeds from sale of Private Placement Warrants
      —         7,520,000  
Proceeds from promissory notes – related party
      —         20,000  
Repayment of promissory notes – related party
      —         (80,000 ) 
Payment of offering costs
      —         (389,219 ) 
    
 
 
    
 
 
  
Net cash provided by financing activities
      —      
 
277,550,781
 
    
 
 
    
 
 
  
Net Change in Cash
   
 
(330,441
) 
  
 
717,467
 
Cash – Beginning
      666,122       4,457  
    
 
 
    
 
 
  
Cash – Ending
   
$
335,681
 
  
$
721,924
 
    
 
 
    
 
 
  
Non-cash
investing and financing activities:
                 
Deferred underwriting fee payable
    $ —       $ 9,660,000  
    
 
 
    
 
 
  
The accompanying notes are an integral part of the unaudited condensed financial statements.
 
4
Table of Contents
ATHLON ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
NOTE 1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Athlon Acquisition Corp. (the “Company”) a blank check company was incorporated in Delaware on October 6, 2020. The Company was formed for the purpose of effecting the merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).
The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of September 30, 2022, the Company had not commenced any operations. All activity from inception through September 30, 2022 relates to the Company’s formation, the initial public offering (“Initial Public Offering”), which is 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 from the proceeds derived from the Investment held in the Trust Account (defined below).
The registration statement for the Company’s Initial Public Offering was declared effective on January 11, 2021. On January 14, 2021, the Company consummated the Initial Public Offering of 27,600,000 units (the “Units” and, with respect to the Class A common stock included in the Units sold, the “Public Shares”), which includes the full exercise by the underwriter of its over-allotment option in the amount of 3,600,000 Units, at $10.00 per Unit, generating gross proceeds of $276,000,000 which is described in Note 3.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 7,520,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to AAC HoldCo, LLC (the “Sponsor”), generating gross proceeds of $7,520,000, which is described in Note 4.
Transaction costs amounted to $15,649,762, consisting of $5,520,000 in cash underwriting fees, $9,660,000 of deferred underwriting fees and $469,762 of other offering costs.
Following the closing of the Initial Public Offering on January 14, 2021, an amount of $276,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”), located in the United States and was invested only in 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 in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting certain conditions of Rule
2a-7
of the Investment Company Act of 1940, as amended (the “Investment Company Act”), as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds held in 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. The Company must complete one or more initial Business Combinations with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (excluding any deferred underwriting fees and taxes payable on the interest earned on the Trust Account). The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to complete a Business Combination successfully.
The Company will provide the holders of the outstanding 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. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per Public Share, plus any pro rata interest then in the Trust Account, net of taxes payable). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
 
5
Table of Contents
ATHLON ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
 
The Company will only proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 following any related redemptions and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company does not decide to hold a stockholder vote for business or other 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 applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.
Notwithstanding the foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, 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 20% of the Public Shares, without the prior consent of the Company.
The Sponsor has agreed (a) to waive its redemption rights with respect to the Founder Shares and Public Shares held by it in connection with the completion of a Business Combination, (b) to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within 24 months from the closing of the Company’s Initial Public Offering (the “Combination Period”) and (c) not to propose an amendment to the Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemptions in connection with a Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined below) or (ii) with respect to any other provision relating to stockholders’ rights or
pre-business
combination activity, unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment. However, if the Sponsor acquires Public Shares in or after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period.
As of the date that these condensed financial statements were issued, the Company has determined that it will not complete a Business Combination within the Combination Period. In accordance with the provisions of its Certificate of Incorporation, the Company plans to (i) cease all operations on December 1, 2022, 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 taxes (less $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 Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Based on the Company’s estimate of its tax liabilities to be paid from interest earned on the funds held in the Trust Account, the Company expects that the
per-share
redemption price for the Public Shares will be approximately $10.06. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless.
In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per public Share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to monies held in 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”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except for the Company’s independent registered public accounting firm), prospective target businesses and other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
 
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ATHLON ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
 
Liquidity and Going Concern
As of September 30, 2022, the Company had $335,681 in its operating bank accounts, $277,371,747 in investments held in the Trust Account to be used for a Business Combination or to repurchase or redeem its Class A common stock in connection therewith and working capital deficit of $165,361. As of September 30, 2022, $1,371,747 of the amount on deposit in the Trust Account represented interest income, which is available to pay the Company’s tax obligations. As of September 30, 2022, the Company withdrew an amount of $320,000 in the interest income from the Trust Account to pay taxes.

In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”)
2014-15,
“Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company is required to dissolve and liquidate if a Business Combination is not completed within the Combination Period. The Company has determined that a Business Combination will not be consummated within the Combination Period, so there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. These unaudited condensed interim financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary as a result of the Company’s substantial doubt to continue as a going concern.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form
10-Q
and Article 8 of Regulation
S-X
of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form
10-K
as filed with the SEC on March 4, 2022, as amended on March 23, 2022. The interim results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future periods.
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.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to
non-emerging
growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
 
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ATHLON ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
 
Use of Estimates
The preparation of the 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 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 financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these unaudited condensed financial statements is the determination of the fair value of the warrant liabilities. Such estimates may be subject to change as more current information becomes available and, accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2022 and December 31, 2021.
Investments Held in Trust Account
At September 30, 2022 substantially all of the assets held in the Trust Account were held in U.S. Treasury bills, accounted for as held-to-maturity securities, and money market funds, which are invested primarily in U.S. Treasury securities and accounted at fair value. At December 31, 2021, substantially all of the assets held in the Trust Account were held in money market funds, which are invested primarily in U.S. Treasury securities and accounted at fair value
.
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 Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption are classified as a liability instrument and is measured at redemption value. Conditionally redeemable common stock (including common stock that features redemption rights that is 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, common stock is classified as stockholders’ equity. The Company’s Class A common stock features 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 presented as temporary equity, outside of the stockholders’ deficit section of the Company’s unaudited condensed balance sheets.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period.
At September 30, 2022 and December 31, 2021, the Class A common stock subject to possible redemption reflected in the condensed balance sheets are reconciled in the following table:
 
Gross proceeds
    $ 276,000,000  
Less:
         
Proceeds allocated to Public Warrants
    $ (10,626,000 ) 
Class A common stock issuance costs
      (15,038,132 ) 
Plus:
         
Accretion of carrying value to redemption value
    $ 25,664,132  
    
 
 
  
Class A common stock subject to possible redemption, December 31, 2021
   
$
276,000,000
 
Plus:
         
Accretion of carrying value to redemption value
      1,341,747  
    
 
 
  
Class A common stock subject to possible redemption, September 30, 2022
   
$
277,341,747
 
    
 
 
  
 
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Table of Contents
ATHLON ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
 
Offering Costs
Offering costs consisted of legal, accounting and other expenses incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs were 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 allocated to warrant liabilities were expensed as incurred in the condensed statements of operations.
Offering costs associated with the Class A common stock issued were initially charged to temporary equity and then accreted to common stock subject to redemption upon the completion of the Initial Public Offering. Offering costs in the amount of $15,038,132 were charged against the carrying value of the Class A common stock subject to possible redemption upon the completion of the Initial Public Offering. Offering costs amounting to $611,630 were charged to the statements of operations upon the completion of the Initial Public Offering (see Note 1).
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 FASB ASC Topic 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The Company accounts for the Public Warrants and Private Placement Warrants (together, the “Warrants”) in accordance with the guidance contained in ASC Topic
815-40
under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Warrants as liabilities at their fair value and adjusts the Warrants to fair value at each reporting period. This liability is subject tore-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the statements of operations. The Public Warrants (as defined in Note 3) and Private Placement Warrants (as defined in Note 4) for period where no observable trade price was available were valued using the Binomial Lattice Model. For periods subsequent to the detachment of the Public Warrants from the Units, the Public Warrant quoted market price was used as the fair value as of each relevant date. The Private Placement Warrants after the detachment of the Public Warrants from the Units is valued using the quoted market price of the Public Warrant, as the make whole provision of Private Placement Warrants are the same as the Public Warrants. As such the Private Placement Warrants has substantially the same terms as the Public Warrants.
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the unaudited condensed financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of September 30, 2022 and December 31, 2021, the Company’s deferred tax asset had a full valuation allowance recorded against it.
ASC
740-270-25-2
requires that an annual effective tax rate be determined and such annual effective rate applied to year to date income in interim periods under ASC
740-270-30-5.
The Company’s effective tax rate was 9.59% and 0% for the three months ended September 30, 2022 and 2021, respectively, and 2.20% and 0% for the nine months ended September 30, 2022 and 2021, respectively. The effective tax rate differs from the statutory tax rate of 21% for the three and nine months ended September 30, 2022 and 2021, due to changes in fair value in warrant liability and the valuation allowance on the deferred tax assets.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position 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. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2022 and December 31, 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 has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
 
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ATHLON ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
 
Net Income (loss) per Common Share
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 is shared pro rata between the two classes of shares. Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
The calculation of diluted income (loss) per share does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, and (ii) the private placement since the exercise of the warrants is contingent u
p
on the occurrence of future events. The warrants are exercisable to purchas
e 21,320,000
shares of Class A common stock in the aggregate. As of September 30, 2022 and 2021, the Company considered the impact of the 900,000 Class B shares subject to forfeiture during the nine months period ended September 30, 2021. There were no other dilutive securities or other contracts that could, potentially be exercised or converted into common stock and then share in the earnings of the Company.

 
    
Three Months Ended
September 30, 2022
     
Three Months Ended
September 30, 2021
     
Nine Months Ended
September 30, 2022
     
Nine Months Ended
September 30, 2021
  
    
Class A
     
Class B
     
Class A
     
Class B
     
Class A
     
Class B
     
Class A
    
Class B
  
Basic net income (loss) per common share
                                                                       
Numerator:
                                                                       
Allocation of net income (loss
)
    $ 2,129,889      $ 532,472      $ 863,129        215,782      $ 10,061,798      $ 2,515,450      $ (86,039 )    $ (22,448 ) 
Denominator:
                                                                       
Basic weighted average shares outstanding
      27,600,000        6,900,000        27,600,000        6,900,000        27,600,000        6,900,000        26,280,882       6,856,985  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
Basic net income (loss) per common share
    $ 0.08      $ 0.08      $ 0.03      $ 0.03      $ 0.36      $ 0.36      $ (0.00 )    $ (0.00 ) 
Diluted net income (loss) per common share
                                                                       
Numerator:
                                                                       
Allocation of net income (loss)
    $ 2,129,889      $ 532,472      $ 863,129        215,782      $ 10,061,798      $ 2,515,450      $ (85,927 )    $ (22,560 ) 
Denominator:
                                                                       
Diluted
weighted average shares outstanding
      27,600,000        6,900,000        27,600,000        6,900,000        27,600,000        6,900,000        26,280,882       6,900,000  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
Diluted
net income (loss) per common share
    $ 0.08      $ 0.08      $ 0.03      $ 0.03      $ 0.36      $ 0.36      $ (0.00 )    $ (0.00 ) 
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Deposit Insurance Corporation Coverage of $250,000. The Company had not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the Company’s condensed balance sheets, primarily due to their short-term nature, other than warrant liabilities (see Note 10.)
 
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Table of Contents
ATHLON ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
 
Recent Accounting Standards
In August 2020, the FASB issued ASU
2020-06,
Debt—Debt with Conversion and Other Options (Subtopic
470-20)
and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40)
(“ASU
2020-06”)
to simplify accounting for certain financial instruments. ASU
2020-06
eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU
2020-06
amends the diluted earnings per share guidance, including the requirement to use the
if-converted
method for all convertible instruments. As a smaller reporting company, ASU
2020-06
is effective January 1, 2024 for fiscal years beginning after December 15, 2023 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently assessing the impact, if any, that ASU
2020-06
would have on its financial position, results of operations or cash flows. The Company has not adopted this guidance as of September 30, 2022.
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed financial statements.
NOTE 3 — INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold 27,600,000 Units, which includes a full exercise by the underwriters of their over-allotment option in the amount of 3,600,000 Units, at a price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and
one-half
of one redeemable warrant (“Public Warrant”). Each whole 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 10).
NOTE 4 — PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 7,520,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant (including 720,000 Private Placement Warrants purchased in connection with the exercise of the underwriters’ over-allotment option) from the Company in a private placement that occurred simultaneously with the closing of the Initial Public Offering. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 10). The proceeds from the sale of the Private Placement Warrants were added to the net proceeds from the Initial Public Offering held in the Trust Account. As the Company has determined that it will not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless. The Private Placement warrants do not meet the criteria to be classified as equity as they are not considered to be indexed to the Company’s common stock in the manner contemplated by ASC Topic 815 because the holder of the instrument is not an input into the pricing of a
fixed-for-fixed
option on equity shares. In addition, the tender offer provision fails the “classified in stockholders’ equity” criteria as contemplated by ASC Topic 815. Therefore, the Private Placement Warrants are treated as liability awards in accordance with ASC Topic 815.
NOTE 5 — RELATED PARTY TRANSACTIONS
Founder Shares
On October 13, 2020, the Sponsor purchased 5,750,000 shares (the “Founder Shares”) of the Company’s Class B common stock for an aggregate price of $25,000. In October 2020, the Sponsor transferred an aggregate of 475,000 Founder Shares to the Company’s Chief Executive Officer and independent directors for an aggregate purchase price of $2,065 or approximately $0.004 per share. On January 11, 2021, the Company effected a 1.2:1 stock split of the Class B common stock, resulting in the Sponsor holding an aggregate of 6,330,000 Founder Shares and there being an aggregate of 6,900,000 Founder Shares outstanding. All share and per share amounts have been retroactively restated for the stock split. As a result of the underwriters’ election to fully exercise their over-allotment option a total of 900,000 Founder Shares are no longer subject to forfeiture.
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading
day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Public Stockholders having the right to exchange their shares of common stock for cash, securities or other property.
 
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Table of Contents
ATHLON ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
 
Administrative Services Agreement
The Company entered into an agreement, commencing on January 11, 2021, to pay the Sponsor a total of $5,000 per month for office space, operational support and secretarial and administrative services. Upon completion of the Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. For the three and nine months ended September 30, 2022, the Company incurred and paid $15,000 and $45,000 in fees for these services, respectively. For the three and nine months ended September 30, 2021, the Company incurred and paid $15,000 and $45,000, respectively, in fees for these services.
Promissory Note — Related Party
On October 9, 2020, the Sponsor issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to which the Company could borrow up to an aggregate principal amount of $300,000. The Promissory Note was
non-interest
bearing and payable on the earlier of (i) March 31, 2021 or (ii) the consummation of the Initial Public Offering. The outstanding balance under the Promissory Note of $80,000 was repaid at the closing of the Initial Public Offering on January 14, 2021 and is no longer available to the Company.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post-Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. At September 30, 2022 and December 31, 2021, no such Working Capital Loans were outstanding.
NOTE 6 — COMMITMENTS AND CONTINGENCIES
Risks and Uncertainties
Management continues to evaluate the impact of the
COVID-19
pandemic and Russian-Ukraine war on the industry and has concluded that while it is reasonably possible that the virus and the war could have a negative 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 the condensed financial statements. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Inflation Reduction Act of 2022
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.    
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of the redemption or repurchase) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.     
 
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ATHLON ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
 
Registration Rights
Pursuant to a registration rights agreement entered into on January 11, 2021, the holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares) will have registration rights to require the Company to register a sale of any of its securities held by them pursuant to a registration rights agreement. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. The registration rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering our securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $9,660,000 in the aggregate. The deferred fee will become payable to the underwriters solely in the event that the Company completes a Business Combination from the amounts held in the Trust Account, subject to the terms of the underwriting agreement.
NOTE 7 — CLASS A COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION
Class
 A Common Stock
— The Company is authorized to issue 380,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of Class A common stock are entitled to one vote for each share. At September 30, 2022 and December 31, 2021, there were 27,600,000 shares of Class A common stock issued and outstanding, all of which are subject to possible redemption and are presented as temporary equity.
Holders of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of our stockholders except as otherwise required by law. The shares of Class B common stock will automatically convert into Class A common stock at the time of a Business Combination, or earlier at the option of the holder, on a
one-for-one
basis, subject to adjustment. In the case that additional shares of Class A common stock or equity-linked securities are issued or deemed issued in connection with a Business Combination, the number of shares of Class A common stock issuable upon conversion of all Founder Shares will equal, in the aggregate, on an
as-converted
basis, 20% of the total number of shares of Class A common stock outstanding after such conversion (after giving effect to any redemptions of shares of Class A common stock by public stockholders), including the total number of shares of Class A common stock issued, or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of a Business Combination, excluding any shares of Class A common stock or equity-linked securities or rights exercisable or exchangeable for or convertible into shares of Class A common stock issued, or to be issued, to any seller in a Business Combination and any Private Placement Warrants issued to the Sponsor, officers or directors upon conversion of Working Capital Loans, provided that such conversion of Founder Shares will never occur on a less than
one-for-one
basis.
NOTE 8 — STOCKHOLDERS’ DEFICIT
Preferred Stock —
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 September 30, 2022 and December 31, 2021, there were no shares of preferred stock issued or outstanding.
Class
 B Common Stock —
The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of Class B common stock are entitled to one vote for each share. At September 30, 2022 and December 31, 2021, there were 6,900,000 shares of Class B common stock issued and outstanding.
NOTE 9 — WARRANT LIABILITIES
At September 30, 2022 and December 31, 2021, there were 13,800,000 Public Warrants and 7,520,000 Private Placement Warrants outstanding to purchase an aggregate of 21,320,000 shares of Class A common stock which are contingent upon the occurrence of future events as discussed below. The Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
 
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ATHLON ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
 
The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, it will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A common stock issuable upon exercise of the warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the sixtieth (60th) business day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the 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 elect, the Company will not be required to file or maintain in effect a registration statement, and in the event the Company do not so elect, the Company will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption of Warrants When the Price per share of Class
 A common stock Equals or Exceeds $18.00—
Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:
 
  •
in whole and not in part;
 
  •
at a price of $0.01 per Public Warrant;
 
  •
upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and
 
  •
if, and only if, the closing price of the Class A common stock equals or exceeds $18.00 per share for any
20-trading days
within a
30-trading day
period ending three trading days before the Company sends the notice of redemption to the warrant holders.
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Redemption of Warrants When the Price per share of Class
 A common stock Equals or Exceeds $10.00
— Once 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 based on the redemption date and the fair market value of the shares of Class A common stock; and
 
  •
if, and only if, the closing price of our Class A common stock equals or exceeds $10.00 per public share for any 20 trading days within the
30-trading
day period ending three trading days before the Company sends the notice of redemption to the warrant holders.
The exercise price and number of Class A common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, 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 Company’s initial Business Combination on the date of the consummation of such initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s 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 the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price and the $10.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
 
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ATHLON ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
 
The Private Placement Warrants are identical to the Public Warrants underlying the Unit sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be
non-redeemable,
except as described above, so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public
Warrants.
NOTE 10 — FAIR VALUE MEASUREMENTS
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
 
    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 following table presents information about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value. The gross holding gains and fair value of held-to-maturity securities at September 30, 2022 are as follow: None were held-to-maturity at December 31, 2021:​​​​​​​
 
                                                                
  
Held-To-Maturity
  
Level
 
  
Amortized

Cost
 
  
Gross
Holding
Gain
 
  
Fair Value
 
September 30, 2022
  
U.S. Treasury Securities (Matures on 10/25/22)
  
 
1
 
  
$
277,317,595
 
  
$
58,084
 
  
$
277,375,679
 
At September 
30
,
2022
and December 
31
,
2021
, assets held in the Trust Account were comprised of $
54,152
and $
276,039,258
in money market funds which are invested primarily in U.S. Treasury Securities. During the nine months ended September 
30
,
2022
and year ended December 
31
,
2021
, the Company withdrew $
320,000
to pay taxes and $
0
of interest income from the Trust Account, respectively.
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
 
Description
   
Level
     
September 30,

2022
     
December 31,
2021
  
Assets:
                           
Investments held in Trust Account – U.S. Treasury Securities Money Market Fund
      1      $ 54,152      $ 276,039,258  
Liabilities:
                           
Warrant Liability – Public Warrants
      1      $ 552,000      $ 8,278,620  
Warrant Liability – Private Placement Warrants
      2      $ 300,800      $ 4,511,248  
The Warrants are accounted for as liabilities in accordance with ASC Topic
815-40
and are presented within warrant liabilities on our accompanying condensed balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the condensed statements of operations.
The Company utilized a binomial lattice model to value the warrants initially for the Public and Private Placement Warrants. Initially, the estimated fair value of the warrant liability was determined using Level 3 inputs. Inherent in a binomial options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its shares of common stock based on historical volatility 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 to remain at zero.
The subsequent measurements of the Public Warrants after the detachment of the Public Warrants from the Units is classified as Level 1 due to the use of an observable market quote in an active market under the ticker SWETW. As of September 30, 2022 and December 31, 2021, the Private Placement Warrants were valued using a Level 2 input due to a make-whole provision that results in the private warrants having substantially the same terms as the public warrants, thus the value of the public warrants is used.
 
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ATHLON ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
 
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 and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.
As of September 30, 2022 and December 31, 2021, the Public Warrants are classified as Level 1 due to the use of a quoted price in an active market. As of September 30, 2022 and December 31, 2021, the Private Placement Warrants are classified as Level 2 due to the use of a quoted price in an active market for a similar instrument. As of September 30, 2022, the fair value of the Private Placement Warrants and Public Warrants was determined to be $0.04 per warrant for aggregate values of approximately $0.3 million and approximately $0.6 million, respectively.
As of December 31, 2021, the fair value of the Private Placement Warrants and Public Warrants was determined to be $0.60 per warrant for aggregate values of approximately $4.5 million and approximately $8.2 million, respectively.
The following table presents the changes in the fair value of the level 3 warrant liabilities:
 
    
Private Placement

Warrants
     
Public

Warrants
     
Warrant Liabilities
  
Fair value as of January 1, 2021
    $ —        $ —        $ —    
Initial measurement on January 14, 2021
      5,790,400        10,626,000        16,416,400  
Change in fair value
      (1,654,400 )       (3,174,000 )       (4,828,400 ) 
Transfer to level 1
      —          (7,452,000 )       (7,452,000 ) 
    
 
 
     
 
 
     
 
 
  
Fair value as of March 31, 2021
    $ 4,136,000      $ —        $ 4,136,000  
Change in fair value
      1,579,200        —          1,579,200  
    
 
 
     
 
 
     
 
 
  
Fair value as of June 30, 2021
    $ 5,715,200      $ —        $ 5,715,200  
Change in fair value
      (451,200 )       —          (451,200 ) 
Transfer to level 2
      (5,264,000 )       —          (5,264,000 ) 
    
 
 
     
 
 
     
 
 
  
Fair value as of September 30, 2021
    $ —        $ —        $ —    
    
 
 
     
 
 
     
 
 
  
Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs. The estimated fair value of the Public and Private Placement Warrants were transferred from a Level 3 measurement to a Level 1 and Level 2 fair value measurements, respectively, during the nine months ended September 30, 2021. There were no transfers during the nine months ended September 30, 2022.
NOTE 11 — SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements, other than disclosed below.
On November 9, 2022, the Company issued a press release announcing the Company has determined that it will not complete a Business Combination within the Combination Period. In accordance with the provisions of its Certificate of Incorporation, the Company plans to (i) cease all operations on December 1, 2022, 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 taxes (le
ss $
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 of the Company (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless.
 
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Athlon Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to AAC HoldCo, LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q 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 and the Company’s plans to dissolve, liquidate and redeem the Public Shares, including the estimated per-share redemption price, 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 10-K 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.

Overview

We are a blank check company formed under the laws of the State of Delaware on October 6, 2020 for the purpose of effecting the merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).

As of the date of the filing of this Quarterly Report, the Company has determined that it will not complete a Business Combination within the Combination Period. In accordance with the provisions of its Certificate of Incorporation, the Company plans to (i) cease all operations on December 1, 2022, 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 taxes (less $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 of the Company (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Based on the Company’s estimate of its tax liabilities to be paid from interest earned on the funds held in the Trust Account, the Company expects that the per-share redemption price for the Public Shares will be approximately $10.06. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless.

Results of Operations

We have neither engaged in any operations nor generated any revenues to date. Our only activities through September 30, 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. We generate non-operating income in the form of interest income on investments held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the three months ended September 30, 2022, we had net income of $2,662,361, which consisted of the change in fair value of warrant liabilities of $1,705,600 and interest earned on investments held in Trust Account of $1,479,038, partially offset by formation and operating expenses of $239,914.

For the nine months ended September 30, 2022, we had a net income of $12,577,248, which consisted of changes in fair value of warrant liabilities of $11,937,068 and interest earned on investments held in Trust Account of $1,652,489, partially offset by formation and operating expenses of $729,946.

For the three months ended September 30, 2021, we had a net income of $1,078,911, which consisted of the changes in fair value of warrant liabilities of $1,279,200 and interest earned on marketable securities held in Trust Account of $4,957, offset by formation and operational costs of $205,246.

For the nine months ended September 30, 2021, we had net loss of $108,487, which consisted of formation and operational costs of $1,022,678 and transaction costs incurred in connection with warrant liabilities of $611,630, offset by the changes in fair value of the warrant liabilities of $1,492,400 and interest earned on marketable securities held in Trust Account of $33,421.

 

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Table of Contents

Liquidity and Capital Resources

On January 14, 2021, the Company consummated the Initial Public Offering of 27,600,000 Units, which includes the full exercise by the underwriter of its over-allotment option in the amount of 3,600,000 Units, at $10.00 per Unit, generating gross proceeds of $276,000,000 which is described in Note 3. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 7,520,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant in a private placement with the Sponsor, generating gross proceeds of $7,520,000, which is described in Note 4.

Following the Initial Public Offering, the full exercise of the over-allotment option, and the sale of the Private Units, a total of $276,000,000 was placed in the Trust Account. We incurred related costs of $15,649,762, consisting of $5,520,000 in cash underwriting fees, $9,660,000 of deferred underwriting fees and $469,762 of other offering costs relating to the Initial Public Offering.

For the nine months ended September 30, 2022, cash used in operating activities was $650,441. Net income of $12,577,248 was affected by changes in fair value of warrant liabilities of $11,937,068 and interest earned on investments held in Trust Account of $1,652,489. Net changes in operating assets and liabilities provided $361,868 of cash for operating activities.

For the nine months ended September 30, 2021, cash used in operating activities was $833,314. Net loss of $108,487 was affected by the change in fair value of the warrant liability of $1,492,400, transaction costs associated with the Initial Public Offering of $611,630, and interest earned on marketable securities held in Trust Account of $33,421. Net changes in operating assets and liabilities provided $189,364 of cash for operating activities.

As of September 30, 2022, we had investments held in the Trust Account of $277,371,747 (including $1,371,747 of interest available to pay the Company’s tax obligations). Interest income on the balance in the Trust Account may be used by us to pay taxes. Through September 30, 2022, we have withdrawn $320,000 in interest earned from the Trust Account to pay taxes.

As of September 30, 2022, we had $335,681 of cash held outside of the Trust Account. The Company has used the funds held outside the Trust Account, for expenses incurred as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination. We may withdraw interest to pay taxes.

In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company is required to dissolve and liquidate if a Business Combination is not completed within 24 months from the closing of the Company’s Initial Public Offering (the “Combination Period”). The Company has determined that a Business Combination will not be consummated within the Combination Period, so there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and mandatory liquidation and subsequent dissolution of the Company raises substantial doubt about the Company’s ability to continue as a going concern. These unaudited condensed interim financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary as a result of the Company’s substantial doubt to continue as a going concern.

Off-Balance Sheet Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 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 off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

Contractual obligations

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of one of our executive officers a monthly fee of $5,000 for office space, utilities and secretarial and administrative services. We began incurring these fees on January 11, 2021 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and our liquidation.

The underwriters are entitled to a deferred fee of $0.35 per Unit, or $9,660,000 in the aggregate. The deferred fee will become payable to the underwriters solely in the event that the Company completes a Business Combination from the amounts held in the Trust Account, subject to the terms of the underwriting agreement.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:

 

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Warrant Liabilities

We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815. We account for the Warrants in accordance with the guidance contained in ASC 815-40 under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the Warrants as liabilities at their fair value and adjust the Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statements of operations.

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 Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our Class A common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ deficit section of our balance sheets.

Net Income (loss) Per Common Share

The Company has two classes of shares, which are referred to as Class A common stock and Class B common stock. Income is shared pro rata between the two classes of shares. Net income (loss) per common stock is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value.

Recent Accounting Standards

Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies.

Item 4. Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

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.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2022. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level and, accordingly, provided reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the fiscal quarter of 2022 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

Factors that could cause our actual results to differ materially from those in this report include the risk factors described in our Annual Report on Form 10-K filed with the SEC. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC, 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.

We may be subject to the excise tax included in the Inflation Reduction Act of 2022 in the event of a liquidation or in connection with redemptions of our common stock after December 31, 2022.

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (H.R. 5376) (the “IRA”), which, among other things, imposes a 1% excise tax on the fair market value of certain repurchases (including certain redemptions) of stock by publicly traded domestic (i.e., U.S.) corporations occurring in 2023 and beyond. The amount of the excise tax is generally 1% of the fair market value of the shares of stock repurchased at the time of the repurchase; however, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock or share issuances against the fair market value of stock or share repurchases during the same taxable year. The excise tax is imposed on the repurchasing corporation itself, not the stockholders from which stock is repurchased. In addition, certain exceptions apply to the excise tax. The U.S. Department of Treasury has been given authority to provide regulations and other guidance to carry out, and prevent the abuse or avoidance of, the excise tax; however, no guidance has been issued to date. Absent such guidance, because Athlon is a Delaware corporation and its securities are trading on Nasdaq, it is currently expect that Athlon will be subject to the excise tax with respect to any redemptions of its Public Shares after 2022 that are treated as repurchases for this purpose. Although we plan to redeem all our Public Stock in 2022 in connection with a liquidation of Athlon, we believe that there is a significant risk that redemptions of Public Stock would be subject to the excise tax if they were to occur in 2023.

We plan to redeem all Public Shares and liquidate, causing our Public Stockholders to receive their pro-rata share of the funds held in trust and our warrants to expire worthless.

We do not expect to be able to find a target business within the period provided for in our Certificate of Incorporation and, therefore, our board of directors has determined that it is in the best interests of the Company and its stockholders to dissolve and liquidate in accordance with the provisions of the Certificate of Incorporation. We plan to (i) cease all operations on December 1, 2022, 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 taxes (less $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 of the Company (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On January 14, 2021, we consummated our initial public offering of 27,600,000 units. The Units were sold at an offering price of $10.00 per unit, generating total gross proceeds of $276,000,000. Jefferies LLC acted as sole book-running manager. The securities in the offering were registered under the Securities Act on registration statement on Form S-1 (Nos. 333-251605 and 333-252032). The Securities and Exchange Commission declared the registration statements effective on January 11, 2021.

Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 7,520,000 warrants at a price of $1.00 per Private Placement Warrant in a private placement to AAC HoldCo, LLC, generating gross proceeds of $7,520,000. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.

The Private Warrants are identical to the warrants underlying the Units sold in the Initial Public Offering, except that the Private Warrants are not transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions.

Of the gross proceeds received from the Initial Public Offering, the exercise of the over-allotment option and the Private Placement Warrants, an aggregate of $276,000,000 was placed in the Trust Account.

We paid a total of $5,520,000 in cash underwriting discounts and commissions, $9,660,000 in deferred underwriting fees and $469,762 for other costs and expenses related to the Initial Public Offering.

 

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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

None

Item 5. Other Information

None

Item 6. Exhibits

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

 

No.

   

Description of Exhibit

    3.1    Amended and Restated Certificate of Incorporation.(1)
    3.2    Bylaws.(2)
  31.1*    Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  31.2*    Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  32.1**    Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  32.2**    Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*    Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH*    Inline XBRL Taxonomy Extension Schema Document
101.CAL*    Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*    Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*    Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*    Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*    Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.INS)

 

*

Filed herewith.

**

Furnished.

(1)

Previously filed as an exhibit to our Current Report on Form 8-K filed on January 15, 2021 and incorporated by reference herein.

(2)

Previously filed as an exhibit to our Form S-1 filed on December 22, 2020 and incorporated by reference herein.

 

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    ATHLON ACQUISITION CORP.
Date: November 9, 2022     By:  

/s/ Chris Hickey

    Name:   Chris Hickey
    Title:   Chief Executive Officer and Director
      (Principal Executive Officer)
    By:  

/s/ David Poltack

    Name:   David Poltack
    Title:  

Chief Financial Officer

(Principal Accounting and Financial Officer)

 

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