DHC Acquisition Corp. - Quarter Report: 2021 September (Form 10-Q)

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

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

Cayman Islands		98-1574798
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Units, each consisting of one share of Class A ordinary shares, $0.0001 par value, and one-third of one redeemable warrant		DHCAU		The Nasdaq Stock Market LLC
Class A ordinary shares included as part of the units		DHCA		The Nasdaq Stock Market LLC
Redeemable warrants included as part of the units, each whole warrant exercisable for one Class A ordinary share at an exercise price of $11.50		DHCAW		The Nasdaq Stock Market LLC

		September 30, 2021				December 31, 2020
		(Unaudited)
ASSETS
Current assets
Cash		$	979,939				—
Prepaid expenses			554,997				—
Total Current Assets			1,534,936				—
Deferred offering costs			—				71,546
Investment held in Trust Account			309,450,720				—
TOTAL ASSETS		$	310,985,656			$	71,546
LIABILITIES, CLASS A ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ (DEFICIT) EQUITY
Current liabilities
Accrued expenses		$	334,597			$	—
Accrued offering expenses			—				37,905
Advance from related party			123,780				—
Promissory note – related party			—				13,641
Total Current Liabilities			458,377				51,546
Warrant liabilities			11,508,724				—
Deferred underwriting fee payable			10,830,775				—
Total Liabilities			22,797,876				51,546
Commitments and Contingencies
Class A ordinary shares subject to possible redemption; 30,945,072 and no shares at a redemption value of $10.00 per share at September 30, 2021 and December 31, 2020, respectively			309,450,720				—
Shareholders’ (Deficit) Equity
Preference shares, $0.0001 par value; 5,000,000 shares authorized; none issued and outstanding			—				—
Class A ordinary shares, $0.0001 par value; 500,000,000 shares authorized			—				—
Class B ordinary shares, $0.0001 par value; 50,000,000 shares authorized; 7,736,268 and 8,625,000 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively			774				863
Additional paid-in capital			—				24,137
Accumulated deficit			(21,263,714	)			(5,000	)
Total Shareholders’ (Deficit) Equity			(21,262,940	)			20,000
TOTAL LIABILITIES, CLASS A ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ (DEFICIT) EQUITY		$	310,985,656			$	71,546

		For The Three Months Ended September 30, 2021				For The Nine Months Ended September 30, 2021
General and administrative expenses		$	549,272			$	1,461,885
Loss from operations			(549,272	)			(1,461,885	)
Other income (expense):
Change in fair value of warrant liabilities			5,322,390				4,767,900
Transaction costs allocated to warrant liabilities			—				(586,339	)
Total other income (expense)			5,322,390				4,181,561
Net income		$	4,773,118			$	2,719,676
Basic weighted average shares outstanding, Class A ordinary shares			30,945,072				23,913,792
Basic net income per share, Class A ordinary shares		$	0.12			$	0.09
Basic weighted average shares outstanding, Class B ordinary shares			7,736,268				7,681,745
Basic net income per share, Class B ordinary shares		$	0.12			$	0.09
Diluted weighted average shares outstanding, Class B ordinary shares			7,736,268				7,736,268
Diluted net income per share, Class B ordinary shares		$	0.12			$	0.09

Cash Flows from Operating Activities:
Net income		$	2,719,676
Adjustments to reconcile net income to net cash used in operating activities:
Change in fair value of warrant liabilities			(4,767,900	)
Transaction costs allocated to warrant liabilities			586,339
Changes in operating assets and liabilities:
Prepaid expenses			(528,197	)
Accrued expenses			334,597
Net cash used in operating activities			(1,655,485	)
Cash Flows from Investing Activities:
Investment of cash in Trust Account			(309,450,720	)
Net cash used in investing activities			(309,450,720	)
Cash Flows from Financing Activities:
Proceeds from sale of Units, net of underwriting discounts paid			303,261,706
Proceeds from sale of Private Placement Warrants			9,189,015
Proceeds from advance from related party			123,780
Repayment of promissory note – related party			(171,357	)
Payment of offering costs			(317,000	)
Net cash provided by financing activities			312,086,144
Net Change in Cash			979,939
Cash – Beginning of period			—
Cash – End of period		$	979,939
Non-Cash investing and financing activities:
Offering costs paid through promissory note		$	130,916
Payment of prepaid expenses through promissory note		$	26,800
Deferred underwriting fee payable		$	10,830,775
Forfeiture of Founder Shares		$	(89	)

Balance Sheet as of March 4, 2021 (audited)		As Previously Reported				Adjustment				As Revised
Class A ordinary shares subject to possible redemption		$	271,198,440			$	28,801,560			$	300,000,000
Class A ordinary shares		$	288			$	(288	)		$	—
Additional paid-in capital		$	5,590,191			$	(5,590,191	)		$	—
Accumulated deficit		$	(591,339	)		$	(23,211,081	)		$	(23,802,420	)
Total Shareholders’ Equity (Deficit)		$	5,000,003			$	(28,801,560	)		$	(23,801,557	)

Gross proceeds		$	309,450,720
Less:
Proceeds allocated to Public Warrants		$	(10,211,874	)
Class A ordinary shares issuance costs		$	(16,924,264	)
Plus:
Accretion of carrying value to redemption value		$	27,136,138
Class A ordinary shares subject to possible redemption		$	309,450,720

		Three Months Ended September 30, 2021 Class A				Nine Months Ended September 30, 2021 Class A
Basic and Diluted net income per ordinary share
Numerator:
Allocation of net income,  as adjusted		$	3,818,494			$	2,058,448
Denominator:
Basic and diluted weighted average ordinary shares outstanding			30,945,072				23,913,792
Basic and diluted net income per ordinary share			0.12				0.09

		Three   Months Ended September   30, 2021 Class B				Nine Months Ended September   30, 2021 Class B
Basic net income per ordinary share
Numerator:
Allocation of net income, as adjusted		$	954,624			$	661,228
Denominator:
Basic weighted average ordinary shares outstanding			7,736,268				7,681,745
Basic net income per ordinary share			0.12				0.09
Diluted net income per ordinary share
Numerator:
Allocation of net income, as adjusted		$	954,624			$	664,774
Denominator:
Diluted weighted average ordinary shares outstanding			7,736,268				7,736,268
Diluted net income per ordinary share			0.12				0.09

•

in whole and not in part;

•

at a price of $0.01 per warrant;

•

upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and

•

if, and only if, the closing price of the Class A ordinary shares equals or exceeds $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant) 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.

•

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 determined based on the redemption date and the “fair market value” of the Class A ordinary shares;

•

if, and only if, the closing price of the Class A ordinary shares equals or exceeds $10.00 per public share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant) for any 20 trading days within the 30-trading day period ending three trading days before the Company send the notice of redemption to the warrant holders; and

•

if the closing price of the Class A ordinary shares for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the warrant holders is less than $18.00 per share, the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding public warrants.

		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.

Description		Level				September 30, 2021
Liabilities:
Warrant Liability – Public Warrants			1			$	7,220,517
Warrant Liability – Private Placement Warrants			2			$	4,288,207

Input		September 30, 2021
Risk-free interest rate			1.13	%
Expected Term (Years)			5.0
Expected volatility			12	%
Exercise price		$	11.50
Unit Price		$	9.77

		Private Placement				Public				Warrant Liabilities
Fair value as of January 1, 2021		$	—			$	—			$	—
Initial measurement on March 4, 2021 (IPO)			5,940,000				9,900,000				15,840,000
Initial measurement on March 5, 2021 (Over allotment)			124,750				311,874				436,624
Change in fair value			245,040				412,621				657,641
Fair value as of March 31, 2021		$	6,309,790			$	10,624,475			$	16,934,265
Change in fair value			—				(103,151	)			(103,151	)
Transfer to Level 1			—				(10,521,324	)			(10,521,324	)
Fair value as of June 30, 2021		$	6,309,790			$	—			$	6,309,790
Change in fair value			(2,021,583	)			—				(2,021,583	)
Transfer to Level 2			(4,288,207	)			—				(4,288,207	)
Fair value as of September 30, 2021		$	—			$	—			$	—

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

We have neither engaged in any operations nor generated any revenues to date. Our only activities through September 30, 2021 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We generate income in the form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our Public Shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination.

We have no obligations, assets or liabilities, which would be considered sheet arrangements as of September 30, 2021. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating sheet arrangements. We have not entered into any sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any assets.

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 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. The Private Placement Warrants and the Public Warrants for periods where no observable traded price was available are valued using a Monte Carlo simulation. For periods subsequent to the detachment of the Public Warrants from the Units, the Public Warrant quoted market price will be used as the fair value as of each relevant date.

Net loss per ordinary share is computed by dividing net loss by the weighted average number of ordinary shares outstanding during the period. We apply the method in calculating earnings per share. Accretion associated with the redeemable shares of Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.

In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU Debt — Debt with Conversion and Other Options (Subtopic and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic (“ASU to simplify accounting for certain financial instruments. ASU 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 amends the diluted earnings per share guidance, including the requirement to use the method for all convertible instruments. ASU is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company adopted ASU as of January 1, 2021, and the adoption did not have an impact on its financial position, results of operations or cash flows.

As required by Rules and under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2021. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules (e) and (e) under the Exchange Act) were effective.

There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2021 covered by this Quarterly Report on Form that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. The material weakness discussed below was remediated during the quarter ended September 30, 2021.

Factors that could cause our actual results to differ materially from those in this report include the risk factors described in our final prospectus for its Initial Public Offering filed with the SEC. As of the date of this Report, there have been no material changes to the risk factors disclosed in our final prospectus for its Initial Public Offering filed with the SEC as supplemented by the risk factors included in our Quarterly Report on Form for the quarter ended March 31, 2021.

On March 4, 2021, we consummated the Initial Public Offering of 30,000,000 Units. The Units were sold at an offering price of $10.00 per unit, generating total gross proceeds of $300,000,000. Citigroup Global Markets Inc. acted as sole book-running manager and Drexel Hamilton, LLC and Roberts & Ryan Investments, Inc. acted as of the Initial Public Offering. The securities in the offering were registered under the Securities Act on registration statement on Form The SEC declared the registration statements effective on March 1, 2021.

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

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